The value of a farm business plan becomes clear when sudden illness strikes, says Joe Horner, University of Missouri Extension agricultural economist.
A farm business plan forces people to think things through. A farm’s business plan formalizes what is in owners’ heads, Horner says, and it serves as an operation manual if an owner becomes ill or dies. The plan can guide surviving workers and decision-makers.
Still, Horner says some farmers don’t write a plan because they find the task daunting. “Make it easy,” he says. “Start with a simple plan and revise it. A two-page plan is a fine place to start.”
“One can divide a farm business plan into two parts, sort of like a front and backyard,” Horner says. “The formal portion of the farm business plan is what you present to outsiders, sort of like a front yard. The appendix to the business plan is more like a backyard, where you store and park stuff you might need someday.”
What to include in appendix
As farms grow, employee turnover and training become bigger issues. Written standard operating procedures are increasingly common on farms. The appendix of a business plan is a good place to store and refine those SOPs.
To save time when someone new steps into management, provide contact information for key service providers such as seed dealers, chemical applicators, veterinarians, nutritionists, repair and parts sources, bankers, lawyers, and insurance providers.
Also, include contact information for service providers who are used less frequently and may not be in the recently paid bills file, such as the well service company, fence builders or a painter for the grain bins.
“Your business plan appendix can be a catchall for all of that information swimming around in the back of your head, or those notes written on a scale ticket or piece of scrap paper in your wallet,” Horner says.
Include calendars and checklists in the appendix. Note important dates such as lease renewals. Add copies of documents such as leases, permits, security agreements and depreciation lists.
On family farms, several members may jointly own a piece of equipment. Write this down to help prevent misunderstandings among family members in the event of one party’s death.
Inform others of plan
When finished with the plan, make sure key members of your organization and family know where to find it.
Also, share a copy of the formal part of the business plan with trusted lenders. The plan is a useful tool for bankers to document their files when called upon to make quick loan decisions if, for example, you want to bid on land or machinery at an auction.
The goal of a business plan should be to make life less stressful, Horner says. Don’t wait to create a perfect business plan. “It is better to create a dog-eared, work-in-progress business plan that reflects practically who, where, when, why and how your farm business thrives," he says.
Horner and other MU Extension specialists offer free assistance with farm business plans. Sign up through Missouri’s Small Business Development Center for Agriculture, or farmers can reach out to Horner at firstname.lastname@example.org or 573-882-9339.