Business Plans for Farmers?
F.S. (Rick) Hirtle, FCA, Partner
BC Dairy Directory
March 2008
No, you haven’t been dreaming the past few years. The business of agriculture is indeed
getting tougher in Canada. It’s tough to foresee what the future holds in the industry. Will
calf prices come up again? Are the rising costs going to put us out of business? If
problems arise, will there be a way to help prepare for this? Farm Credit Canada believes
there is.
In a 2001 study, Farm Credit found that only 16% of Canada’s agricultural producers
actually had a written business plan. To encourage farm students to get into the practice
of preparing business plans, they started rewarding those students whose plans were best
prepared.
So, you ask, how can a business plan help the farmers of today?
What a business plan does is help work through, on paper, many of the questions you
have for your farming operation. Today, more than ever before, you have to understand
what you want from your farm and what your farm is capable of doing. You have to
analyze your costs and potential incomes to see how you can survive. The costs for this
month and the next are reasonably predictable, even the month after that and so on. Even
one year is within your costs’ scope. Following your predecessors’ footsteps may no
longer work.
You need to sit down and ask yourself the hard questions about your farm’s future.
Where do you want to be? Do you simply want to be a dairy producer or have you
thought of being an organic dairy producer? Does it need to make more money? What
else would you like to do with your farm? Now is the time to research and look to the
future to see if there is more that you might do on your farm. Speak with suppliers,
competitors and industry and government representatives to spawn ideas that might help
you.
Typically, we at BDO Dunwoody do a SWOT analysis outlining the Strengths,
Weaknesses, Opportunities, and Threats for your farm. This helps when you try to set the
vision, goals and objectives your farm needs to thrive. From this, you will know your
strengths and also your weaknesses. That is why putting it on paper is so important. All
this work goes into what we call a business plan.
The structure of business plans vary, but most follow the same basic outline:
- Executive Summary – usually one or two pages that encompass the overall plan
and lists its key points;
- Operations History – again, a short summary of the operation’s achievements and
growth, including its financial performance, usually over the last five years;
- Management – details on the ownership structure, staff positions and reporting
structure, and background on each member of the management team;
- Products and Services – a brief summary of what the operation produces and the
services it provides;
- Industry Analysis – summary of the business environment;
- Market Profile – size, segment, trends and customer profiles;
- Competition – identification of primary and secondary competitors;
- Marketing – sales efforts and marketing plan;
- Identifying Risks
- Financial Position and Outlook – identification of financial requirements and
projections, including costs of goods sold, operating expenses, salaries and
interest rates, to name a few, as well as financing schedule and expenditure plan.
When formulating your business plan, determine who will be reading it. The purpose of your plan is to explain your business and answer the questions and concerns of your intended reader. Plain, direct language will get your point across quickly and clearly.
Rick Hirtle, Chartered Accountant, has a large dairy, orchard and vineyard, and ranching clientele and has helped many farm families achieve their optimum succession. Rick is located in BDO’s Salmon Arm office, but travels throughout the province to meet and work with clients. He can be reached by telephone at (888) 832-7171 or by emailing rhirtle@bdo.ca.
This material is general in nature and should not be relied upon to replace the requirement for specific professional advice.
