Developing a Business Plan

1. Developing a Business Plan A Step by Step Guide

2. This Material Developed By Joseph Bonelli from the University of Connecticut and Jon Jaffe from Farm Credit East “This institution is an equal opportunity provider.”

3. What is a Business Plan? • Tool used to convert idea into a reality for either a new business or for changes to an existing business • Keeps everyone focused on same goals • Provides a necessary analysis of all aspects of the business • A business plan is a dynamic document – For each business stage, the business plan must be updated

4. Business Plans are Written For: • Owners • Business managers • Lenders and investors • Consultants and employees

5. Basic Components • Executive Summary • Business description • Operations • Marketing plan • Management • Financials

6. Section #1 Executive Summary

7. Executive Summary Overview of: • Your business including product or service and what you will do and how you will do it • Key elements of business plan • Why business will be successful

8. Executive Summary Include the following information: • Business Description • Mission Statement • Goals • Capital Needs

9. Business Description • Provide a brief description of all aspects of your farm business • Include an overview of the business products and/or services

10. Mission statement • Explains the scope and essence of the business • States why it is in business • Must express the collective values of the business

11. Mission Statement Examples • Good – Produce a healthy and nutritious product at a reasonable price for our customers • Bad – Make lots of money

12. Goals • Goals are directions for your business and outline what you want your business to look like in the future • Too many goals may result in less effective results. 4 to 8 is probably about right for most small businesses • All activities undertaken by the business should have the objective of achieving these goals

13. Goals Consider these areas when developing goals: • Business Marketing • Crop practices • Financial considerations • Personnel and personal needs

14. Goals Goals must be: • S pecific: • M easureable • A ttainable • R ewarding • T imed

15. Capital Needs • Provide an overview of the business capital requirements and an overview of the major purpose(s) for which the funds will be used. Example Tractor: $12,000 Plow: $2,000 Harrow: $2,000 Start up money: $6,000 Total need: $20,000

16. Section #2Business Description

17. Business Description • What business will you be in? • What will you do? • What will you produce? • What service will you provide?

18. Location • Physical Address • Description of property, i.e. acreage, buildings and other defining attributes. • Proximity to nearby towns • Proximity to other “landmark” locations

19. Products and Services • What product or products does your business produce? • What service does it provide? • This section should be descriptive and explain what is “unique or special” about what you sell.

20. Size and Scope of Your Current and Planned Business • Be descriptive • Dollar Sales • Volume of sales • Customer count • Is business new, or existing? • If existing, is it stable or growing?

21. Personnel • Who owns the business? • Who runs the business? • How many employees? • Full-time versus Part-time • Year-round versus seasonal

22. Legal Structure • Sole proprietor? • Partnership? • LLC? • Corporation? • Other/Multiple entities?

23. Special Attributes of Business • Why was this business started? • What is special about the business or products? • Why should the customer be excited? • Why should the reader of this plan be excited? • (Hint: You want the reader excited if you are trying to get something from them such as a loan)

24. Customers • Who are your customers? • Where are they located? • Are they single visit or repeat?

25. Competition • Who is your competition? • Where are they located? • What is the biggest challenge they present? • What weakness do they have that you plan to exploit?

26. Growth Plan • What is your expansion plan, if you have one? • How fast do you want to grow? • Do you plan multiple locations? • What is the biggest opportunity for growth? • What is the biggest limitation?

27. Section #3 Operations

28. Operations Include the following: • Production system • Risk management • Timeline

29. Production System • If you produce crops, describe your current and future crop plan including crops produced, acreages, and yields. • If you provide a service, describe how you provide that service

30. Risk Management • Business insurance • Labor: Health and disability • Contracts: Legal liability • Compliance with all local, state and federal regulations and tax requirements

31. Your Current Risk Management Plan ? Is the plan adequate to manage the increased risk exposures of the current year? Are you prepared to live-with the business plan interruptions that would occur if a sizable loss/disaster occurred? What is the deadline for making the needed changes to it? What Action do you plan to take and when? Remember it’s your responsibility to develop the plan…and to live with the consequences of the plan

32. Timeline • The tasks that must be completed and • The date when the tasks must be completed to achieve goals

33. Section #4 Marketing Plan

34. Marketing Plan Big Picture Questions. Are you? • Wholesale or retail? • Year-round or seasonal? • Prime location or a destination?

35. Target Customer • Local – define target area • Destination – special trip • One shot or repeat customers? • Online sales? • What is your “ideal” customer?

36. Marketing Sites • Website? • Facebook? • Other social media? • Newspaper? • Billboards? • Radio?

37. Other Marketing Options • Customer Loyalty Programs • Coupons • Discount Sales • Educational Classes • PR/Goodwill Efforts

38. Why Should They Buy From You?? • Product or service quality • Specific knowledge • Price • Convenience • Buy local

39. Who Will Develop the Marketing Plan? • Owner? • Employee? • Marketing Firm? • Other?

40. Who Will Execute and Oversee the Marketing Plan? • Owner? • Employee? • Marketing firm? • Other?

41. Cost of Marketing Effort • Initial Cost - i.e. Website development • Early Years – 3 -5% of gross sales likely • Ongoing – 1 – 3% of gross sales likely Which form of marketing is going to give you the most “bang for your buck”?

42. Exterior Signage Primary Sign – How does it greet your customers? Parking signs – Make it easy Entrance sign – Sounds simple, but rarely used! Outside product – Location and description Outside service/event – Location and description

43. Interior Signage • Printed or handwritten? • Direction signs • Pricing signs • Information booths or customer service area • Cashier/checkout location

44. Other Marketing Efforts Customer loyalty programs Gathering customer info (emails and addresses) Analyzing Customer Data – Now what do you do with this information? Using this information – What is the customer benefit?

45. Marketing – Risk Mitigation • Track Commodity Cycle • Contract Input Prices (i.e. lock in fuel prices) • Value Added Products • Product Diversification • Spread Sales over Season • Market Thru Alternative Channels (i.e. CSA) • Increase Direct Sales

46. Section #5Management

47. Management Include the following information: • Management team • Personnel plan • Organization

48. Management team • List the members of your management team. • Briefly describe their qualifications and their management roles.

49. Personnel Plan Develop: • Job descriptions • Compensation plans • Employee handbooks • Training procedures

50. Organization • Explain how owners and employees relate and contribute to the success of the business • If starting or expanding a business, describe the new positions • Develop an organizational chart for all employees