Developing Your Business Plan - TAA Online TrainingWho Needs a Business Plan? • Any business will...

Developing Your Business Plan

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Developing a Business Plan

for

Trade Adjustment Assistance

Kevin Klair

Center for Farm Financial Management

University of Minnesota

© 2011, University of Minnesota

Developing a Business Plan

• A business plan is required to complete all TAA training phases and to receive the maximum payment

• This workshop will help prepare you to write your business plan

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Objectives

• Why develop a plan

• How to develop a

plan


What Is a Business Plan?

• A formal statement of business goals,

the reasons why they are believed attainable,

and the plan for reaching those goals

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Who Needs a Business Plan?

• Any business will benefit, but a business plan is particularly valuable for:– New or expanding businesses

– Businesses making major changes


Do You Need a Business Plan?

• Are you a new or expanding business?

• Are you considering major changes to your business?

• Do you have multiple family members who need to be on the same page?

• Are you involved in creative, niche, value added, or alternative enterprises

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Purpose of a Business Plan

• Demonstrates that you have taken the time to objectively think through the details required to make the business succeed


Purpose for a Business Plan

• Effectively communicate your business

– Externally to lenders, investors, partners

– Internally to family members & employees

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Purpose of a Business Plan

• Most importantly, will help you improve the management of your business– It is the blueprint for operating your business

– Serves as your operational guide

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Lessons Learned

• Business planning:– Is very time consuming

– Is best done by the business owner/management

– Can be very expensive

• Your business plan should be a living document– Revisited and revised at least annually


Major Functions of Management

• Production management

• Marketing management

• Personnel management

• Financial management

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Sections of a Business Plan

• Executive summary

• Business description

• Operations plan

• Marketing plan

• Personnel plan

• Financial plan


How to Develop a Business Plan

• Most people use business planning software– Provides

•Outlines

•Suggestions on content

•Sample plans

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AgTransitions

• If your plan is to transition out of the business– There is an alternative business planning tool

– AgTransitions

– Develops a plan to transition a business to next generation

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AgTransitions

• If you want to transition your business to someone else or retire– Tell your consultant

– AgTransitions may be a better tool for you than AgPlan

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Business Plan Sections

• In the next few segments of this workshop will we briefly discuss the sections in AgPlan

• There is more detailed information about each section in AgPlan’s tips and resources


Business Plan Sections

• Almost no one uses all of the sections in the AgPlan outline

• Use the sections that are relevant to your business and leave the others blank

• A good business plan does not have to be long

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Business Description



• The business description is the easiest to write

• It is a great place to start

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• AgPlan business description sections:– Business overview

– Location or Location/Area fished

– Facilities or Gear/Facilities

– Business history

– Ownership structure


Operations

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Operations

• The Operations section describes the production management system

• It describes what you produce and how you produce it


Operations

• Production management is one of the most important aspects of running a farm or fishing business

• Production level or yield is usually the most important factor determining the cost of production and profitability

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Operations

• There is rarely one area where significant cost reductions can be attained

• The key to more profitable businesses is managing many costs two to five percent more efficiently


Operations

• AgPlan operations sections:– Products

– Services

– Production system

– Customer service*

– Inventory management*

– Licenses, permits and regulations

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Operations

• AgPlan operations sections (cont.):– Patents and trademarks*

– Risk management

– Environmental issues

– Quality control

– Implementation timeline


Operations

• Many of the topics in the operations section are issues that, if mishandled can destroy a business very quickly

• They are issues that lenders, partners and family members want to know are being addressed

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Operations

• Products and Services– Describe the products you produce and the production

levels you achieve

– If you have multiple products or services, describe their importance to your business

– Are you planning new products or services


Operations

• Products and Services– You might also discuss in this section how and why you:

•Specialize in a product or a few products

•Diversify your line of products

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Operations

• Production Systems– How do you produce your products or services?

– Do technologies you use give you any advantages?

– Describe proposed production system changes and how they will improve production levels or efficiencies


Operations

• Customer Service– If you deal directly with customers, good customer

service is critical.

– Describe what you do to provide good customer service

– How do you monitor your reputation?

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Operations

• Inventory Management– Do you produce a product that needs to be stored?

– Do you need specialized storage facilities?

– Do you need to maintain an inventory of supplies? Do you have reliable suppliers?


Operations

• Licenses, Permits and Regulations– If you are making changes, you likely will need to get

permits or licenses

– Identify the permits and licenses needed, when you need them and the process to get them

– Identify how you respond to major regulations affecting your business

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Operations

• Risk Management– Risk management is increasingly important

– Discuss the risks you face:•Production, price, financial, legal, and human

– And the methods you use

to manage risk:•Insurance, pricing, financing,

safety procedures, and

contingency plans


Operations

• Environmental Issues– Environmental issues and regulations are important for

fishing and agricultural industries

– How are you addressing environmental concerns and regulations?

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Operations

• Quality Control– How do you produce high quality products or service?

– Is quality important for your marketing plan?

– If you handle food products, how do you address food safety issues?


Operations

• Implementation Timeline– If you are planning major changes, the implementation

timeline is critical

– Outline the major steps that must be accomplished and deadlines to complete

– Discuss the impact on your business while the changes are being implemented

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Marketing


Marketing

• Your marketing plan will depend on how you market your products– Sell commodities to processor or wholesaler

– Contract production

– Direct marketing to consumers or retail

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Marketing• AgPlan marketing sections:


Marketing

• Market Trends– Describe what is happening to the market for your

products•Threats or challenges

•Consumer demand

•Competition

•How will this impact you?

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Marketing

• Marketing Strategy– This topic is only available for the ag traditional

commodity & fishing outlines•Where and how do you sell your products?

•Production contracts

•Forward pricing using contracts, futures, options


Marketing

• Customers– Who are your customers?

•Will they change?

•Are there new customers you want to gain?

– Demonstrate that you understand your current and future customers

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Marketing

• Marketing Contracts– If you have production or marketing contracts describe

them•What portion of your production is under contract?

•What are the terms of your contracts?

•How do your contracts benefit your business?


Marketing

• Strategic Partners– Partnerships can add to your success

– Almost all businesses have some form of partnerships•Markets, input suppliers, producer organizations, other

producers

– Some have more formal partnerships

– Who are your important partnerships and how do you benefit from them?

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Marketing

• Pricing– What do you charge for your products or services?

– How do you determine your prices?

– How do your prices compare to competitors?

– Can you capture premium prices?


Marketing

• Promotion– How do potential customers become aware of your

product or services?

– Promotion can take many forms and may be limited only by your creativity

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Marketing

• Distribution– How do you distribute your products?

•Direct shipping, delivery, on-site sales

•Orders via phone, online, other

•Timing

– Distribution channels•Wholesale, processors, retail, consumers

•Direct marketing


Marketing

• Market Segments– Market segments are similar groups of customers

•Demographic – age, gender, occupation

•Geographic – local, national, international, rural, urban

•Individuals, other businesses, distributors, processors

– What are the primary market segments for your products and services

– How big are the segments?

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Marketing

• Target Market– Which market segments do you target?

– Why?


Marketing

• Competitive Advantage– Who are your competitors?

– How well do you compete with them?

– Do you have competitive advantages?•Quality, price, location, facilities, equipment, distribution,

alliances, recognition, employees, service

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Management & Organization



• People make a business successful

• Who will manage your business, who will provide the labor, and how will they do it?

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• Your business plan should document that you have the management and personnel resources necessary to run your business or a plan to obtain them



• AgPlan management and organization sections:– Management team

– Board of directors

– Advisory board

– Personnel plan

– Professional services

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• Management Team– Who manages your business?

– What are their roles?

– What are the qualifications of the management team?



• Management Team– If changes are planned, is the management in place to

implement them?

– What additional management skills may be needed?

– Do you have a management transition or contingency plan?

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• Board of Directors– If you have a board of directors, identify the board

members and their affiliations

– Describe the strengths they bring to your business.

– Describe how your board functions



• Advisory Board– Some businesses have an advisory board

– If you have an advisory board, identify the board members and describe the strengths they bring to your business

– Describe how your board benefits your business

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• Personnel Plan– For many family farms and fishing businesses, just

describe the roles of the family members

– If you do have employees, describe their roles and responsibilities

– What additional tasks will be created if you make major business changes?



• Personnel Plan– Your personnel plan should describe your job

descriptions, compensation plans, incentive plans, employee handbooks, and training procedures

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• Professional Services– What professional services do you use?

– How long have you used them, what is your relationship with them?

– Are their services essential, how do you manage the third party risk of losing their services?


Financial

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Financial

• For many businesses, the financial section is the most important part of their business plan

• The financial section is particularly important if you are proposing major changes or starting a new business


Financial

• AgPlan financial sections:– Financial position

– Historical performance

– Financial projections

– Asset management

– Benchmarks

– Capital request

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Financial

• Financial viability is generally evaluated from three perspectives:– Solvency

– Profitability

– Liquidity


Financial

• Solvency evaluates changes in net worth – How much do you own if all debts paid

• Profitability monitors earnings– How much income are you generating

• Liquidity estimates cash flow and debt repayment ability– The ability to pay bills when due

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Financial

• Financial Position– A balance sheet measures business solvency

– Compares the assets invested (what you own) in the business with the sources of capital (liabilities – what you owe and your equity)


Financial

• Historical Performance– Usually evaluated using income statements to measure

profitability

– Measures how much income the business is making in relation to the resources used to produce that income

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Financial

• Financial Projections– Evaluate liquidity using a cash flow statement

– A projection of all sources and uses of cash during a specified planning period

– Evaluates the business’s ability to meet loan payments and other financial obligations on time


Financial

• Asset Management– Your financial plan should also describe how you

acquire and manage capital assets - purchase, lease, or custom hire

– How efficiently are assets being used?

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Financial

• Benchmarks– Compare your business performance to other similar

businesses

– Can be very valuable as you evaluate changes to your business and if you are requesting financing


Financial

• Capital Required– The final part of your financial plan should describe how

much money you need to implement your business plan

– Describe the sources of your financing

– Present your financing request if you have one

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Financial

• In addition to financial statements,– Include a written description of the strengths of your

financial position, projections, and historical performance

– Describe the assumptions you used to make your financial projections


Financial

• Your Financial Statements– Generate financial statements using a software

program, it’s easier

– FINPACK is a widely used ag financial planning software that can also be used by fishermen

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Financial

• Your TAA business planning consultant will have access to FINPACK

• FINPACK provides financial statements and also financial ratios to help evaluate the meaning of your financial numbers


Balance Sheet

• A balance sheet will be required as part of your plan

• A blank balance is included with your handouts

• You might start working on it before meeting with your consultant

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Balance Sheet

Assets Liabilities

Current (< 1 year) Current

Intermediate (1–10 yrs) Intermediate

Long term (> 10 years) Long term

Personal Personal

Total assets Total liabilities

Net worth


Balance Sheet

• Inventory of your financial and physical resources

• Evaluates financial strengths and weaknesses

• Evaluates credit risk

• Starting point for financial plan

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Executive Summary


Executive Summary

• The first section of your plan– But may be the last section you write

• Summarizes your entire plan

• May be the only section some people read– Needs to briefly, but very effectively describe your

business and your plan

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Executive Summary

• AgPlan executive summary sections:– Business description

– Mission statement

– Goals

– Plan summary

– Capital request


Writing Your Business Plan

• We have briefly looked at all the sections of the AgPlan outline– REMEMBER, almost no one uses all of the sections

– Use the sections important to your business

– A good plan only needs to be 20 to 50 pages

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• What is needed to write a business plan?– Take time to think about your business and where you

want it to go

– Communicate with family members and partners

– Research potential markets, prices, equipment, structures, and available options



• Most people need 2 - 3 months to write a good business plan

• If you are investing the time to write a business plan– Develop a living document that you can use as a guide in

your business for years

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• Developing a good business plan can be very valuable for your business– Use it to improve management and profits

– To measure progress toward your goals and financially

– To differentiate your business

– To make it easier for others to do business with you



• TAA provides valuable resources to help you write your business plan– An individual business planning consultant

– Business planning tools

– Financial planning tools

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Four Phases

• Remember four TAA training phases1.Initial orientation

2.Intensive workshops – 12 hours

3.Initial business plan

4.Long-term business plan


Planning Consultant

• When you complete Phase 3 - Initial Business Plan– You will be assigned a business planning consultant

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Planning Consultant

• Will contact you by:– Phone, email or mail to set up first meeting

• Will meet with you up to three times

• Will continue to interact with you via AgPlan, email, or phone to help you finish


Planning Consultant

• Will NOT write your plan for you!

• They are coaches – To help you understand how to write your plan

– To suggest ideas to expand your thinking

– To help you keep progressing on your plan

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Planning Consultant

• Consultant will ask you to sign an agreement at the first meeting,– Consultant will not write your plan

– Will not give advice nor is liable for any decisions you make

– Will not try to sell you any additional services

– Will keep all information confidential

– Will not guarantee that you will finish or get a payment


Planning Consultant

• Most business planning consultants are:– Retired or current business management educators

– People with experience helping develop business plans

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Planning Consultant

• If there are problems with your business planning consultant, call your regional TAA center


Western Center (509) 477-2168

Southern Center (501) 671-2165

North Central Center (800) 535-3456

Northeast Center (302) 831-1325

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The Process

Initial Orientation

Intensive Training

Initial Business

Plan

Long Term Business

Plan

3 Years Available to Complete


The Process

Long Term Business Plan Reviewer 1

Reviewer 2 Payment

Finish

Approval

Approval

Not Approved

Not Approved

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Conclusion

• We hope you find developing a business plan:– Rewarding

– Challenging

– Profitable


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Initial Business Plan

• After you have completed 12 hours of workshops, the next step is to complete the Initial Business Plan.

• This is a simple two page, six question plan



• The six questions are:– In several sentences, describe your business

– Describe the key challenges to your business that you need to address

– Describe the knowledge and skills you gained from TAA technical assistance workshops?

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• Questions (continued):– In what ways will you apply the knowledge and skills you

gained to your business?

– What changes are you considering to improve your business profitability and to improve your ability to compete with imports?

– Do you intend to complete a long-term business plan?



• You will also be asked if you are:– An owner/manager

– An owner/manager –husband & wife both applied

– A crew member/employee

– A crew member/employee – operating, or intending to start, a business

• Your answers will help assign the appropriate business planning consultant to you

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• Your plan will be reviewed and when approved, will make you eligible to receive up to a $4,000 payment from FSA

• If not approved, it will be returned to you with suggestions on how to improve it



• The approval criteria are:– You must answer all six questions

– You must make a serious effort to answer the questions

– Your answers must make rational sense

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• The approval criteria (cont.):– Your answers will be used to assign a business planning

consultant to you, so describe your business and plans as best you can

– Consultants have different experience and expertise



• The Initial Business Plan will be handed out at this workshop

• If you have finished 12 hours of training by the end of this workshop, you can complete the Initial Plan here and turn it in to the instructor

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• If you have not completed 12 hours of training or if you do not want to finish it at this workshop– You can take it home and mail it in later

– You can do it online at www.TAAforFarmers.org



• The advantage of doing it at this workshop is that the instructors are available to help you if you have questions

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Developing Your Business Plan - TAA Online TrainingWho Needs a Business Plan? • Any business will...

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