How to Write a Business Plan for Farming

and Raising Livestock

Community Q&A

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

1.

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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.

1.

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.

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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.

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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 goalsand 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 oraccounting 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 tovalidate 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.

5
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, andCropping 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 alltypes 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).

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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.

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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.

Tips

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.

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.

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 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.

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.

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