How to Write a Business Plan for Farming and Raising Livestock

A business plan is essential to have in place before you seek to start up a farm business, no matter what else you've done by way of preparation. In today's world, animal agriculture is more complex and more variable than it was 100 years ago. There are changing markets, high costs, low profit margins, different ways to raise cattle, and niche markets.

The type of business plan you make is up to you, but the following step-by-step process of making a proper business plan will help you in the long run.

Steps

Find some paper, a pencil, or a computer with Microsoft Word, One-Note or a similar text program. This will enable you to write or type down everything that comes to your mind, including the goals and aspirations you have for starting up a livestock operation.
Start brainstorming. You don't have to make a fancy, scholarly-essay out of it, nor does proper grammar, spelling or writing skills matter here. Making bullet points of what you want to do, how you want to do it, and what you're willing to do to get there is the best way to start.
- You should be mainly brainstorming about your goals and objectives. It's much more effective to run any business when you have a goal in mind to reach rather than having vague ideas of "wanting to do something with animals". That's simply not enough, and is certainly not going to get you anywhere fast!
- As you consider your goals, remember that strategy is not the same as marketing. The strategy for your business is how you plan to deliver value to your customers (your "value proposition"), how you intend to you convince potential customers to obtain that value from you by communicating your distinctiveness as a producer (or, what makes you different from other farms or ranches), and why you can deliver that value better than other producers (your performance anatomy). Your marketing plan should explain how you intend to communicate your strategy to your existing and potential customers.
Do a SWOT analysis. SWOT is a popular acronym used in businesses and economics that stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weaknesses are the internal or controllable characteristics of a business. Opportunities and Threats are external characteristics that are out of your, your business or an industry's control. To do a SWOT analysis, make a table with four columns, with the titles being: Strengths, Weaknesses, Opportunities and Threats. Place these titles at the head of each column. Or, if you think it's going to be too tedious and inconvenient to use a table, then you can also use a separate page for every factor.
- Such an analysis is very simple and flexible to use, since you can use it to analyze your personal self, your business, or the industry you are wishing to start a career in.
- These four planning strategy factors should describe everything about you, from showing what you can and can't do, what you may need assistance with from more professional and knowledgeable people, what you're willing to learn, what troubles and issues you may face in your farming venture, and what chances may enable you to both succeed and become profitable.
  - Remember that there are two forces that will affect you and you will need to analyze:
    - Internal forces that you have control over such as what breeds you choose, whether you want to run an intensive or extensive operation, how you feed your animals, etc.
    - External forces that you have no control over such as the weather, the topography and soil-type of the land you are farming/ranching on, local, national and international industry issues, market prices, product demand and consumer preferences.
- Do an internal SWOT analysis of you and your operation. Ask yourself what your good at and what needs improvement, what you can do to improve and what things may make you reconsider doing any sort of farming. This will also include the consideration of getting help from people who are more experienced than you in certain areas of your plan and your pool of knowledge. Help can range from advice from a veterinarian, an accountant that has experience in doing financial assessments of farming operations, a farm building inspector, a breeder that has been in the business you are interested in for over 20 years, etc.
  - Also analyze your farm, the land your farm sits on and your family. Ask similar questions as mentioned above, only with your family you will need to ask about times you should have to spend with them, what will happen if you put your farming operation before your family, what you can do to encourage and teach your kids to be involved in your operation, etc.
- Do an external SWOT analysis of the type of livestock industry you plan on getting into, whether it's bovine (beef or dairy), equine, porcine, poultry, caprine/ovine, or even exotics (such as bison, elk or emu). It is highly recommended to do your research in order to complete a thorough SWOT analysis of the type of industry you are interested in. Look at everything from national industry news from well-known and local agricultural newspapers and magazines, to visiting trusted websites. For example, if you are wanting to get into the Canadian cattle business, have a look at the Canadian Cattlemen's Association webpage at CCA.org. You will find plenty of information on national industry news and concerns. Western Producer (for the provinces of Alberta, British Columbia, Saskatchewan and Manitoba) is also a great newspaper to look through for various industry news and updates.
  - The more research about what you're getting into that you do at this stage, the more aware you will be of what to expect when surprises do come. When you finally get started on your business plan, you'll be far more aware of the pitfalls, challenges, needs and requirements it takes to be involved and compete in the kind of livestock/farming operation you want to have.
In a separate table, write four columns starting with "Where am I at now," "Where do I want to be," "How do I get there" and "How do I know I have arrived". Again, brainstorm your way through this. If you only come up with one or two points, that's fine, but to break down these four questions further to help you answer them, here are some points to consider when answering these questions:
- Where am I at now? Include a SWOT analysis (see earlier step), for these areas: customers, operations, human resources, and finance. If you don't have a business, a SWOT analysis as mentioned in the previous step is totally fine.
- Where do I want to be? This is the question where you establish all your goals and objectives that you wish to achieve within the next 3 to 5 years. Include everything such as financing, marketing, herd health, breeding, birthing, weaning, culling, selling, pasture management, feed management, costs analysis, etc.
  - This question is also good to address your personal, family and business goals. When doing family goals, have each of your family member write out goals for themselves, not discussing anything when writing them out, but discussing them after they have been written out.
    - Personal goals include things like working fewer hours, furthering your education in areas like different commodity markets or accounting and production programs, etc.
    - Business goals are focused mainly on the farm unit as a business entity; examples include maximum debt load to carry, possibly owning or controlling x number acres, etc.
- How do I get there? This is the most important part of your business plan, because this is the area where you put on paper how you want to get the things you want for a better you, family and business. Brainstorming is great tool to use in this section, as you can always have a Plan B, C, D, etc., in addition to your Plan A.
- How do I know I have arrived? If you visualize your business plan as a journey, it is not difficult to understand that you will need to measure your progress along the way and determine if you are moving towards your goals, spinning your wheels or rolling backwards. This is done by defining, collecting and reviewing metrics, measurements and Key Performance Indicators on a regular basis in order to validate your plan and decisions, direct your future activities, justify any modifications to the plan and intervene when things are not happening according to the plan. All your goals should be measurable. Metrics and measurements will give you the answer to this important question.
On a different file (if you're typing on a computer) or a different piece of paper/page, start writing out your Business Plan. Create the Business Plan by making three main plans: Strategic Plan, Operating Plan, and a Succession Plan:
- Strategic Plan. This is where you tie in all your brainstorming thoughts, ideas, objectives and goals together from steps 2 to 4. Basically, the kind of business plan you would see other firms develop is the following:
  - Vision Statement: A statement of what you or your farm will look like in the next 5 to 10 years.
  - Mission: This determines or defines the purpose the organization attempts to perform in society. This statement should concisely explain what the company does, for whom and why.
  - Values: These are general standards or guidelines that are important to your farm and farm family.
  - Situational Analysis: This is the process of identifying and understanding how your business is positioned within the environment you operate, both internal and external. Step 3 is what this part of the strategic plan is all about.
  - Goals: What are the major achievements you would like to accomplish in the next 3 to 5 years?
  - Objectives: How do you plan on achieving your goals?
  - Critical Success Factors: Areas of performance critical to long-term successes of an organization, and its development, growth and achievement. For each CSF you should define one or more Key Performance Indicators (KPIs), which are metrics you will use to determine if you are achieving your CSFs. CSFs are expressed as general statements of goals ("Maintain customer satisfaction.") while KPIs are more specific ("Decrease in number of product packaging complaints.")
  - Plan of Action: Strategies and actions that are implemented to meet the targeted objectives.
    - In a nutshell, you don't have to go through the headache of answering all of the questions posted above. Instead, use the three simple questions above in Step 4 as a means to answer all 8 of these standard business-plan questions.
- Operating Plan. This is the plan where you outline the day-to-day activities of the business including what gets done, how it's done, who does it and when it's done. This plan is generally shorter term and usually revolves around a production cycle. There are four sub-plans that are important to this plan: Production plan, Marketing plan, Financial plan, and Human Resources plan:
  - Production Plan: What will be grown or processed to be sold? For livestock producers this includes two main components: Animals, and Cropping systems. With the animals, this is where you lay out things like breeding, culling, weaning, care of newborn animals, herd health, etc. The second includes number of acres and type of commodity to be grown to support the herd (hay, silage, green feed, pasture, grain, etc.). Identify all types of enterprises on your farm.
    - Production resources are also important to mention: Land base, Equipment base, and Buildings and Structures.
  - Marketing Plan: Where and how will you sell your commodities? Remember, selling is just getting rid of what you have. When you market, you have to plan to sell commodities at a good price.
  - Financial Plan: This includes budget analysis, revenues and expenses, debt, unpaid labour, opportunity costs, benchmark analysis of yourself from other operations, statements of cash flow, depreciation of machinery, animals, buildings, etc., wages, family living costs, etc.
  - Human Resources plan: Most farms rely on one worker (i.e., the owner) to run the operation. But, nonetheless, human resource plans should highlight hiring issues facing the business and how to address them. It should further describe the kind of people that are required to operate the business (general responsibilities, title, skills, availability and any training programs needed.)
  - Quality plan: Quality control is the ability to define what you will produce and the desired quality you must achieve in your products, establish the processes required to do so, continually check your product against quality parameters, recognize when you have not delivered the desired quality and have the means to improve your process activities to correct the issue and return your product to the desired quality. There are many quality frameworks and methodologies, but one of the simplest is Dr. W. Edward Deming's Continuous Quality Improvement cycle. It has four steps, which are repeated continuously to gradually improve quality and process maturity over time.
    - Plan: Establish the objectives for whatever it is you intend to do, the processes necessary achieve those objectives and the metrics and measurements required to control the processes and prove that the objectives are being achieved.
    - Do: Execute the plan and collect metrics and measurements along the way as defined in the previous phase.
    - Check: Review the results, metrics and measurements and determine if any improvements can and should be made to the plan.
    - Act: Implement the improvements so the next time the process is executed the results will be better.
- Succession Planning. This can be the hardest part of a business plan, as one has to plan what should happen if the main operator is injured or worse, dies. Succession planning includes developing a continuity plan for your business and determining the process of transitioning a business to new owners. This transition may be an outside sale (equipment and land auction sale), or an inheritance sale (passing the business down to the next generation).
Identify the type of farm ownership. There are seven main types of ownership: Proprietorship, General Partnership, Limited Partnership, Co-ownership, Joint Venture, Corporation, or Trust. These are outlined briefly next:
- Proprietorship: This is the simplest form of business organization. It primarily involves one person running the whole she-bang. Debts and negligent acts committed by employees are the responsibility of the proprietor. But, all the legal complications and expenses and negotiations for agreements are not required, nor is a business name required.
- General Partnership: This means two or three people running an operation. With more than one person running a farm, this means that the business must have a registered name, and each partner is responsible for all debts, obligations and liabilities of the operation. This partnership automatically dissolves with a death, bankruptcy, or insolvency.
- Limited Partnership: This is basically one person is responsible for everything in the firm, whereas the other is only there to supply capital, nothing more or less. A limited partner has no active part in the goings-on of an operation, but he may inspect the books of the firm and advise management.
- Co-ownership: This is where two or more persons own property jointly.
- Joint Venture: This is commonly used in farming, where there is a joint partnership between parties, and is created in order to conduct a specific or limited commercial venture without creating a partnership. This is commonly a temporary arrangement between two parties.
- Corporations: These are legal entities where shareholders own the corporation through the ownership of shares. It is a separate legal entity, distinct from its shareholders. The individual shareholder's liability is limited to that person's investments in the corporation, unless the shareholder has personally guaranteed the obligations of the corporation. A corporation can provide very flexible framework in terms of succession to the next generation. The owner may also give employees shares in the growth and profit of the operation without giving up management rights of a partner.
- Trust: This is a relationship where legal ownership of the property is separated from beneficial ownership of the property.
Tie it all together. Don't be afraid to make changes to your plan. A business plan is not some rigid rule-setting standard that must be set in stone. Rather, it is a paper that can be changed as the business grows and as new ideas and new issues arise. Usually a business plan should be reviewed at least once a month to once a year to look at what was written and what changes should be made.

Video

Tips

A business plan is good to have when signing on for a loan at the bank. They will be more interested in the financial portion of your business plan, because they need to see how it will affect them in terms of what they can get out of it in terms of money.
Put everything in writing. Nothing's worse than not writing something down and suddenly forgetting it. Also, have a separate file folder for thus business plan so you know where it is and where you can access it in the future. If you have it on the computer, save it on a hard drive or a data stick so if your computer crashes on you and you can't get your work back up, you have it saved on a separate disk.
Ask for help when writing a business plan. Get a professional business analyst or someone similar with lots of experience analyzing and writing up such plans so they can help you if and when you are stuck on a particular section.
No business plan is set in stone. You must remember to have it on hand so you can dig it out and change any part of your plan if something unseen has come up.
- Every good business has to change and reanalyze their business plan whenever necessary. For new business owners and those starting up, they will often have to look at their business plan much more frequently than one that is already well established.

Warnings

Don't go in over your head and attempt to write out a business plan in one sitting. It may take a week or more before you get it all done, so take your time. Indeed, many established businesses started by spending six months or more preparing business plans; rushing will simply harm your business in the long run.
Don't think that you won't have to look at your business plan ever again for the rest of the time you are running your operation. You should always try to analyze what yourself and your business at least once a year to know where you are struggling and where you are doing great.

Things You'll Need

Computer text program or paper/notepad and pens
Printer if you want hard copies of computer documents
Research tools such as the internet, local library, libraries of agricultural bodies, etc.
Phone numbers of people in the industry that you're interested in so that you can ask any important questions
Books or websites on making business plans (but don't over-complicate things)
Books on information about certain livestock interested in raising
Newspapers and magazines of industry news and events in your area or the area you are interested in pursuing your farming career

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