TAKING STOCKA Farm Business Planning WorkbookFor The Beginning Farmer
AcknowledgementsThis material has been modified for use in British Columbia from the original developed by the Saskatchewan Ministry ofAgriculture, Regional Services Branch, Farm Business Management Services. This material is based on the original ‘GrowingYour Farm Profits’ workbook created by the Ontario Ministry of Agriculture and Rural Affairs in co-operation with the Governmentof Canada and the Agricultural Adaptation Council.The British Columbia version was prepared by the British Columbia Ministry of Agriculture Business Development Team that aredelivering the Agri-food Business Development Program.For additional information please contact :Telephone: 1 888 221 7141Email: AgriServiceBC@gov.bc.caThis program is funded by Growing Forward 2, a federal-provinical-territorial initiative.
INTRODUCTION TO ‘TAKING STOCK’VALUE OF PLANNINGWhere do you want your farm to be 5, 10, or 15 years from now? What do you want your farm business to look like? How doyou go from where you are today to where you want to be in the future? What level of profit will you need to accomplish yourbusiness and personal goals? As you will learn through this process, planning is a necessary part of maintaining and increasingyour farm profits.Farmers are no strangers to planning. You cannot have future crops without planting and pruning in advance. There would be nofuture livestock without a breeding plan. On a day to day basis, farmers keep an eye to the sky, making sure they are preparedwith alternate work plans, come rain or snow.While excellent production is important to the farm business, there are also a number of business management skills required tohelp farmers successfully meet their business and personal goals.The first step in an orderly planning process is a self assessment of farm business management practices. These practicesinclude the nine identified areas listed below:1.2.3.4.5.6.7.8.9.Business StrategyMarketing StrategyProduction EconomicsHuman ResourcesFinancial ManagementSocial ResponsibilitySuccession PlanningBusiness StructureRisk AssessmentAs you go through the workbook you will:Assess your farm management systems, knowledge, and skills; Understand how planning provides the framework for effectivedecision making; Set and Prioritize goals for the farm’s future; Identify resources that can help meet these goals; Build on yourstrengths; and Create a Farm Action Plan to improve your farm management skills and knowledge.2INTRODUCTION
IntroductionHOW TO USE THIS WORK BOOKThe Taking Stock Farm Business Planning Workbook involves answering a series of questions to help you identify strengths andweaknesses in your new or existing operation in nine farm business management areas. Completing this self assessment andthe subsequent farm action plan is intended to prepare you to make the most efficient use of the Farm Business AdvisoryServices program funding and your farm business advisor.Each section contains an introduction to help you answer the self assessment questions. Possible answers are provided for eachquestion to guide you in assessing the situation for your farm, and are rated according to a traffic light: green (strength) meansyou understand and are dealing with the issue; yellow (caution) means that some improvements should be made (proceed withcaution); and a red (weakness) answer implies that you need further understanding and that specific action is required. If thequestion does not apply to your operation; indicate this in the blue (not applicable) box.Once you have selected the most appropriate answer then indicate whether this issue is a high, medium or low priority for yourfarm operation.At the end of each section there are two worksheets. The first worksheet is used to list the high priority strengths, cautions andweaknesses for your farm. The second worksheet is to develop action statements to address the high priorities for that area offarm business management.Prior to completing your Farm Action Plan you will transfer the most important action items from the worksheets in each of the 9sections to the Taking Stock Summary – Action Items on pages 57 and 58. In addition, we recommend you also conduct a briefreview of external opportunities and threats and identify your key business and personal goals (pages 59-62).When the Taking Stock workbook for the Beginning Farmer and Farm Action Plan are completed, you are then eligible to accessthe B.C. Farm Business Advisory Services Program funding to employ a farm business advisor for Tier 1: Basic Farm FinancialAssessment or Tier 2: Specialized Business Planning. The Farm Action Plan will provide the basis of your discussion with yourfarm business advisor in addressing areas in your farm business and management practices that you have identified asimportant in developing your farm enterprise.2
1. Business StrategyWhat do you hope to accomplish with your business?Focus on your strengths and key success factorsBusiness strategy planning is the first step down the roadto successful farm management.As a business owner, having a set of business goalsgives you the power to steer your business activities inthe same direction as your hopes and intentions. Thisforward way of thinking can be compared to planting afield: inexperienced farmers will often focus on what isgoing on with the planting behind them, only to end upwith a very crooked seed row. With some coaching, aninexperienced farmer will learn to pick out a tree or alandmark in the distance that he can line up with thetractor’s muffler. Suddenly the rows are straighter, andthe new farmer is able to complete the job faster thanbefore. Similarly, business managers need to have aclear vision of the future to create a business that is inline with their strategic goals. This vision could includethings such as machinery or land purchases, newventures or expansion plans and should include whenyou would like to achieve them.If you like to grow plants or look after livestock then focusyour work on that and get someone to help withmarketing. If you enjoy meeting people and selling yourproduct then get help in the production side. Do what youdo best and get help with the rest.Know where you want to be– your business goalsTake the time to look forward. Know whether you want tounderstand your production and accounting statements,change your focus, expand your business or increaseyour value-added activities. You must be specific aboutyour business goals, so that you travel in the directionyou want to go.Set Measurable Steps or Goals to get you thereUnderstanding how you are going to achieve yourbusiness goals is as important as having the goal in thefirst place. Sometimes it becomes difficult to see thesteps needed to reach your business goal. Start on thepath towards this goal by establishing a series ofmanageable steps, build in flexibility, and re-evaluate aseach step is completed. Make sure to consider allelements in the business including risks.What can you do to help make your new farm enterpriseor small farm expansion a success?Follow your passionA characteristic of successful farmers and other smallbusiness owners is often a passion for what they aredoing. This shows through in your product and helps youpersevere when addressing the challenges that willinevitably arise.BUSINESS STRATEGY
Business StrategyKnow how to tell when you are thereIt is entirely possible to pass your business goals withoutknowing you have achieved them. Each of your goalsmust have at least one clear objective, so that you canrecognize when you reach success. A business goal toimprove your efficiency is a good target, but without adefined objective, like reducing the number of labourhours per acre farmed from one hour per acre to half anhour per acre, you will have no idea when you havearrived at this target.Look for that tree on the horizon! Look back only to makesure you have benchmarks and are aware of yourstrengths and weaknesses. Otherwise, focus yourattention on those activities that take you from where youare, towards the end you have in mind.4
Business StrategyBusiness Strategy Assessment QuestionsBusiness Strategy assessment (Goals for the business and family)1) Why have you chosen to start a farm business or develop your farm?GreenWe can easily list reasonswhy we are interested instarting a farm business.YellowWe do not know how todescribe the reasons forwanting to start a farmbusiness.RedWe do not know why wehave decided to start a farmbusiness.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 2) Do your business goals support your family goals?GreenYellowYes, we can identify how ourinterest in starting a farmbusiness supports our familygoals.We can identify our interestin starting a farm businessbut we are not sure how thiswill impact our family goals.RedNo we keep our businessactivities separate from ourpersonal activities and donot see the relationshipbetween them.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 3) Do you know what type of farm you want and/or what you want to produce?GreenYes, we decided to produceby considering the marketour interests, skills, abilities,farm assets, and how thefarm would fit with thefamily’s interests.5YellowI have always had aninterest in producing.RedI have not yet decided whattype of farm I want.Self AssessmentPriorityRed High Yellow Medium Green Low
Business StrategyIf Yellow or Red, consider using the BCAGRI Guide to Starting a NewFarm Enterprisehttp://www.al.gov.bc.ca/scregion/ to help identify the type offarm and farmproduct that best matches your skills, abilities and interests andfarm location.4) Unless you sell your product as a commodity through a marketing system, your success will depend on establishing aspecial characteristic that differentiates your product from others. Do you have clear understanding of what makes yourproduct different than your competitors product?GreenYellowRedWe have a clearunderstanding of what makesour product unique.We have discussed whatmakes us different but arenot totally clear on whatunique characteristics willattract customers to ourproduct over othersWe have no idea what makesour product different fromthe product produced atother farms.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 5) Have you established a plan on how you will achieve your farm business goals?GreenYellowYes, we have identified goalsand have a plan.We can identify some goals,but have not established aplan.6RedSelf AssessmentPriorityWe have not set any goals forRedour farm business or family.Yellow High Medium Green Low N/A
Business StrategyBusiness Strategy Assessment - High Priority SummaryFrom your assessment, list the high priority strengths, cautions and/or weaknesses for your farm with respect to BusinessStrategy. On the following page identify specific action goals to address these priority issues. At the end of the workbook you willuse these action goals to develop an overall farm action plan.High Priority Business Strategy Strengths123High Priority Business Strategy Cautions123High Priority Business Strategy Weaknesses1237
Business StrategyBusiness Strategy Assessment – Action Plan ItemsPriority DescriptionAction Statement(indicate whether a strength, caution or weakness)(goals)Transfer your action plan items with respect to business strategy to your Summary - Action Items on Page 66.8
2. Marketing StrategyWhy is marketing vital to the overall success of your farmbusiness?If you are selling into a regulated marketing system,central selling desk or marketing co-op then the importantconsideration for your farm business is to maximizeoutput at minimum cost. It is important to monitor globaltrends in commodity prices as they may impactproduction decisions, i.e. hand harvesting vs. machineharvesting of raspberries or blueberries.If you are not selling an undifferentiated commoditythrough a formal marketing organization then marketing isa critical component of your farm success.Market needs create business opportunities,not the other way around!increasingly important and will keep you one step aheadof your competition.The three areas of self-assessment in Marketing areGeneral, Commodity and Direct Marketing. Whether youare trying to expand your current business, or are lookingto start a new venture, assessing your marketing skillsand abilities will help you determine what areas ofmarketing you need to examine and develop.What can you do? Constantly work to understand your buyers’ needs andwhat affects your market. Identify market opportunities Look for ways to use marketing experts. Develop and follow a written marketing plan.Changing economic conditions, changing tastes,changing demographics all impact the demand for farmproducts. It is therefore very important to have theknowledge and information you need to make informeddecisions about what the market is demanding and howto meet that demand.In order for your business to thrive, it is crucial that youunderstand your buyers’ needs, taking into considerationwhether you are dealing with local (farmers’ markets),regional, national, or international distributors andretailers. Knowing what your buyers’ needs are andwhere you can provide for those needs is becomingMARKETING STRATEGY
.
Marketing StrategyMarketing Strategy General - GeneralMarketing strategy assessment1) Do you, your business partner or someone in your family have the interest and skills to market your product?GreenYellowRedWe have a strongbackground and training inmarketing and use this skillin our daily business.We have some backgroundand training in marketingand try to use this skill inour daily business.We have very little trainingor background in marketingand have little desire to usethis skill in our business.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 2) Have you estimated your unit cost of production (COP) to inform your pricing options?GreenYes, we have estimated theunit COP for our new farmbusiness.YellowNo, but we have a goodidea of the range that it willfall in.RedNo.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 3) Have you determined what marketing restrictions may apply to your products, for example quota, permits, health or slaughterregulations?GreenYes, we have a detailedunderstanding of theregulations that impact themarketing of our products11YellowWe have an understandingthat there are marketingrestrictions but do not knowhow they will specificallyaffect the marketing of ourproductRedNo.Self AssessmentPriorityRed High Yellow Medium Green Low N/A
Marketing StrategyDirect Marketing – (If Applicable)1) Have you investigated the different types of direct farm marketing (u-pick, on-farm retail, farmers’ markets, etc.)?GreenYellowYes, we plan to use one ormore of these in our newfarm operation. We arealso looking for andresearching new ways tomarket our products.We have a limitedunderstanding, but wehave not researched howthese can support our newfarm operation.RedNo.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 2) Have you included the time it will take to market your product into your work schedule?GreenYellowYes, we have estimatedthe time needed to marketour product and consideredit in our work plan.We recognize thatmarketing will take time buthave not included it in ourwork plan.RedNo, we have notconsidered the timeneeded to market ourproduct.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 3) Do you know if the product you plan to produce is in demand by the market place?GreenYes, we have followed thelocal markets and areaware of the productsvalued by the targetcustomers.12YellowWe have followed the localmarkets and have somesense of the productsvalued by the customers.RedNo, we are not aware of theproducts valued by themarket.Self AssessmentPriorityRed High Yellow Medium Green Low N/A
Marketing Strategy4) Do you know your products’ quality characteristics that are valued by your customers and the management practices thatimpact those characteristics?GreenYes, we know the differentquality characteristics andthe management practicesthat impact our product.13YellowWe have an idea of what isspecial about our productbut do not understand thedirect connection betweenthe quality characteristicsand management practices.RedNo.Self AssessmentPriorityRed High Yellow Medium Green Low N/A
Marketing StrategyMarketing Strategy Assessment - High Priority SummaryFrom your assessment, list the high priority strengths, cautions and/or weaknesses for your farm with respect to MarketingStrategy. On the following page identify specific action goals to address these priority issues. At the end of the workbook you willuse these action goals to develop an overall farm action plan.High Priority Marketing Strategy Strengths123High Priority Marketing Strategy Cautions123High Priority Marketing Strategy Weaknesses12314
Marketing StrategyMarketing Strategy Assessment – Action Plan ItemsPriority DescriptionAction Statement(indicate whether a strength, caution or weakness)(goals)Transfer your action plan items with respect to marketing strategy to your Summary - Action Items on Page 66.15
3. Production EconomicsHow can you improve your production system and your costof production?Why should you be concerned? Transportation systems Purchasing and supplier relationshipsWhat can you do?Making and delivering your product or service to themarket captures the profit opportunity for your business.Product quality shows the value the customers want.Production systems, facilities and equipment, andpurchasing skills all affect the quality, the yield, and thecost of production. In a commodity market especially it isincreasingly important to manage and maintain a low costof production.In business, there never seems to be enough hours in theday to get production done, so it is important that theproduction system is as organized as possible. Set production, service and quality goals. Have a record system that provides cost of production,yield and quality information in a timely manner. Compare your results to your past records and toindustry benchmarks where available. Develop positive relationships with your suppliers sothey can provide product information, productionadvice, training, market trend information and marketreferrals.An organized production system helps to: Create time to manage the other aspects of thebusiness such as marketing, financial, humanresources, business direction, and structure; and Create time for personal, family, and communityactivities.Areas of production or service focus discussed inproduction are: Product or service qualityProduction systemBenchmarkingCost of productionFacilities and equipmentPRODUCTION ECONOMICS
Production EconomicsProduction Economics Assessment QuestionsProduction Economics assessment1) Have you set annual goals for the level of production of your product?GreenYes, we have set annualproduction goals.YellowWe have an idea of whatwe think we can producebut have not set specificgoals.RedNo, we have not setproduction goals.Self AssessmentPriorityRed High Yellow Medium Green Low N/A 2) Have you set up a system to record your production?GreenYes, we have a system tokeep complete productionrecords.YellowWe plan to keep someproduction records but theyare not complete.RedNo, we do not have asystem in place to keepproduction records.Self AssessmentPriorityRed High Yellow Medium Green Low 3) Are your production records designed to inform/improve your production management?GreenYes, production recordsare designed to informoperations, forbenchmarks, and to trackboth costs and salesfigures.19YellowOur records are justdesigned to give finalnumbers and notnecessarily inform farmoperation decisions.RedNo, we do not have asystem in place to keepproduction records.Self AssessmentPriorityRed High Yello
When the Taking Stock workbook for the Beginning Farmer and Farm Action Plan are completed, you are then eligible to access the B.C. Farm Business Advisory Services Program funding to employ a farm business advisor for Tier 1: Basic Farm Financial Assessment or Tier 2: Specialized Business Planning. The Farm Action Plan will provide the basis of your discussion with your farm business advisor .
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