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Financial Planning for Small Businesses

Financial Planning for Small Businesses

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Financial Planning for Small Businesses

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  1. Financial Planning for Small Businesses Paul Ellinger pellinge@uiuc.edu University of IllinoisApril 1, 2008

  2. Outline • Background: Illinois Farm Beginnings • Overview of FAST Tools • Business Plan: Economics of the business • FAST Tool: New Company Simulator

  3. Illinois Farm Beginnings • Farmer Training Program initiated in Minnesota • Illinois Farm Beginnings is facilitated by • University of Illinois (Leslie Cooperband), • University of Illinois Extension (Deborah Cavanaugh-Grant) Two non-profit organizations • The Land Connection—Congerville, IL, • Angelic Organics CSA Learning Center—Caledonia, IL • http://illinoisfarmbeginnings.org/

  4. Illinois Farm Beginnings • 10 sessions in the winter focusing on planning for profit • Hands-on Field Days: April to October • Mentoring from existing farmers

  5. Sessions Session 1 Clarifying values; Setting personal and Strategic Business Goals Session 2 Building Your Business Plan Session 3 Whole Farm Business Strategy: Tools and Techniques Session 4 Financial Planning 101: The Fundamentals Session 5 Financial Planning 201: Planning for Profit Session 6 Marketing 101: The Fundamentals Session 7 Marketing 201: Realities from the Field Session 8 Connecting with Financial Resources and Farm Business Plan Presentations Session 9 Connecting with Conservation Resources and Farm Business Plan Presentations Session 10 Mentor/Mentee Meeting

  6. Session Outline • Understanding the economics of your business • Identify the major revenue sources of the business • Develop a method to determine the costs of producing/preparing for sale each item • Variable costs vs fixed costs • Distinguish your one-time costs from ongoing costs • Identify vulnerabilities • Oops and double oops assumptions • Develop a break even price and/or production level • Financial statement primer • What does your lender want? • Tools and information

  7. FAST Tools • farmdoc companion project initiated in 1999 • Development of spreadsheet-based tools to aid decisions for producers, lenders, consultants and investors • Facilitate use, access, distribution of tools and resources through CD and internet distribution • Quarterly subscription • farmdoc download • via workshops • Approximately 30,000 CDs produced and another 35,000 downloads • Increased demand for education and training

  8. FAST Tools - Overview Computerized Decision Aids Financial Analysis Investment Analysis Loan Analysis FarmManagement Grain Marketing & Management Risk Management Yield Database Utilities

  9. New Company Simulator • Key components • Five year financial plan • Cash Flow: Monthly cash flow to account for seasonality • Balance Sheet • Income Statement • Financial ratios • Ability to evaluate 6 alternative crops/enterprises • Simultaneously evaluate 3 economic scenarios • Break even analysis • Solver for initial capital needed under alternative conditions

  10. FAST Spreadsheets Demo of program www.farmdoc.uiuc.edu/fasttools/