Operating an agriculturally based business in the Northeast today can be incredibly rewarding, but it is not without challenges. The landscape of the Northeast’s agricultural industry is constantly changing. Traditional methods of acquiring ownership of an agricultural business and business agreements, such as inheritance and ‘handshake deals,’ are being replaced with more complex business arrangements. Many new or even established enterprises are entering into business relationships with unrelated business partners, developing more sophisticated lease agreements and looking farther to find customers. It is ever more important to have a written plan to develop the appropriate resources and arrangements for the acquisition and management of a successful agricultural business.
A business plan is an important tool for any business, especially one that is exploring new avenues for acquiring capital and business relationships. At its core, a business plan is a communication tool. The plan communicates the values and goals of the business to potential investors, strategic partners and even customers, as well as the pathway to accomplishing these goals and realizing values.
The business plan starts (and ends) with the mission statement and primary goals of the business. The mission statement describes the business’s direction, while the goals outline the key points or milestones in its journey. It tells a story of where the business is today, where it would like to be, and how (and when) it will get there.
The development of a plan includes assessments of existing resources, both in terms of physical capital (cash, equipment, land, inventory, etc.) and human capital. The plan identifies in specific terms what capital is needed and when it will be needed. The missing ingredients — whether it is cash, land, or key talents — are all identified. Anticipated rewards, such as profits, ecological benefits, lifestyle and more, are all projected based on a successful completion of the steps outlined in the plan. Contingency plans address the most likely ‘what if’ scenarios that could derail or sideline the plan.
With a written plan in hand, a business owner can be well positioned to have conversations with potential business partners or capital investors about joining the team. The contributions of each individual will be well defined, as well as the rewards. As a result, landowners may be more willing to sign a multi-year lease agreement that perhaps includes an option to purchase or a staggered lease payment schedule for an operator who can show them a well-thought-out plan for the business.
Do you have a plan for your business? Is it in writing? Do you have in place all of the right ingredients for operating a successful business? If you need guidance to improve your answers to these questions, give one of Farm Credit East’s business consultants a call. We can help you in developing the most important plan, which really is a plan to sell yourself to the key strategic partners for the realization of your business goals. Learn more about Farm Credit East’s business consulting services or give us a call.
Additionally, view a past blog post from Farm Credit East business consultant Ethan Robertson for a few tips on developing a business plan.