The way farmers grow crops will always change, figures Union, NE, farmer Gary Todd. “Just look at what's happened the last few years,” he says. “It's always been my philosophy that how we grow will change, but every farm needs a set of key business principles that guide it every year.”
Todd remains in a minority among farmers who see a formal business plan as a way to document how they grow their crops, the business principles they use to manage their farms and their plans for the future.
“It's what ag really needs,” he says. “Private industry will help you with the production side of your operation. But few really provide any assistance for the business side of farming.”
While there are numerous benefits to a farm business plan, Todd uses his heavily for enterprise analysis. “We have livestock, crops, a seed sales business and we do custom farming,” he says. “We need to know what gives us the best return.”
A business plan is far more than financial analysis. It includes both short-term and long-term goals. “A guy always collects the goals for his business in his mind. But that's sort of a fuzzy picture,” Todd says. “It's good to write them down. It puts them clear in your mind.”
University of Missouri extension economists Joe Parcell and Vern Pierce list these benefits for a farmer who takes the time to develop a business plan:
It establishes what's most important for the farm in measurable terms;
It establishes a clear direction for management and employees to follow;
It anticipates problems and takes steps to eliminate them;
It allocates resources (labor, machinery and equipment, buildings and capital) more efficiently;
It establishes a base for evaluating management decisions and employees;
And, it provides a management framework that allows quick responses to changing conditions.
“If you can't succeed in your operation by writing down goals and making decisions toward accomplishing them, then there's no way you're going to succeed anyway,” Parcell says.
That wouldn't be true if farmers could isolate themselves, points out Cole Gustafson, North Dakota State University ag economist. “Unfortunately, few farmers can afford to do that. The successful farmer today has to be flexible and willing to accept change,” he says. “With a farm business plan, farmers can develop long-term (strategic) and functional plans to guide them in making adjustments to unexpected changes. By planning, you will be better prepared to seek and capitalize on small windows of opportunity.”
Like Parcell, Todd believes that farmers without business plans won't survive in the future. “There's a lot you can learn when you put together a business plan for your farm. It really opens your eyes on how to run your business better. That's a great competitive advantage for farmers who have put together plans. And, you have to compete against those farmers.”
There are a number of sources that can help you put together a business plan. The MidWest Plan Service's 65-page book, Developing a Longer Range Strategic Farm Business Plan (NCR-610A), discusses how to write one. Order through your local MidWest Plan Service or call the University of Minnesota Extension Distribution Center at 800-876-8636. Online you'll find business plan guides from Penn State University and the University of Maryland at http://www.arec.umd.edu/policy/Carroll/FarmBusPlan/farmbusplan.htm. From the University of Missouri, try http://www.agebb.missouri.edu/first/mgt/business-plan.htm.
For information on attending an Iowa Soybean Association business management workshop, turn to page 44.