Business plans have multiple benefits for the aspiring entrepreneur. It not only forces you to map out exactly what you want to do when setting up your business, but it also allows you to create a realistic picture of your financial needs, and strengthens your pitch to potential investors.
Certified business advisor (CBA) Willem van Jaarsveld says the best business plans require extensive preparation. Growing up, Van Jaarsveld had a passion for farming. He did not come from a farming family but pursued his dreams while a student.
“In my heart [there] was a desire and a burning fire to be a farmer. So, agricultural economics was the passport that I used to get into farming.
“I started with broilers in my student years as well as dairy cattle. I started with three cows while I was still studying, to make up money to be able to study.”
After completing his degree in agricultural economics, Van Jaarsveld found that his passion lies in farm management, a passion he still cherishes today.
To start writing a business plan, Van Jaarsveld provides eight major areas of planning that the aspiring farmer needs to review before sitting down to write the business plan.
1. Farm with something that suits you
Van Jaarsveld recommends that aspiring farmers choose a farming pursuit that matches their interests or passions. He says that, while it may seem easier to farm according to your surroundings, farming requires a certain passion.
“If you are an animal person, don’t farm with crops. If you are a plant person, don’t farm with animals. I’m not saying that there isn’t a combination or type of middle way that you also can go for but be very sure that whatever you want to farm with is the type of thing that, even when it is the harshest of circumstances, you will still be passionate [about].”
Van Jaarsveld acknowledges that physical surroundings play a big part in your potential farming possibilities, with things like climate, natural resources, roads, proximity to markets and many other factors determining what you do with the land available to you.
He still maintains, however, that aspiring farmers should do their utmost to match their farming ventures with who they are.
“Read your environment and farm in harmony with that environment. The most important environment is your thoughts, your mental makeup, your “who I am”. That is very important. You can’t separate yourself from that. So be honest and make the right decision.”
2. Technical information
Ultimately, a successful farming venture is one that yields profits. By exploring the technical information – that is the information that deals with the profit-making aspects – you gain a more realistic idea of where your business should be going, the risks involved, and what is required to minimise or mitigate those risks.
Van Jaarsveld says that arranging your business in the following sequence gives it a logical flow:
- background on the business;
- production plan;
- marketing plan;
- labour plan;
- mechanisation plan;
- management plan; and a
- financial plan.
Mitigating risks to your business is an incredibly important part of business planning. For Van Jaarsveld, this means planning for solutions that allow you to work around a problem, as opposed to starting over.
“You must have a contingency plan because there will be difficulties and you can’t let a bit of resistance in your way forward force you to go into a totally new direction. That is a start over. But a good contingency plan is only ‘I steer around the obstacle, and I know why, I know how, and I still know where my goal is, and I’m still on track to the goal, despite whatever life throws at me’.”
When drafting business plans, he finds that the most effective contingency plans look at multiple tiers of risk. The contingency measures listed in the plan need to show everyone involved in your business that the risk is lowered by the measures you will put in place.
“Whenever I drafted a business plan myself, whether it is for myself or for somebody else, I call [the contingency plan] a ‘what if’ scenario. I always build in high, low and medium ‘what if’ scenarios so it can show me, or whoever is reading the business plan, what [could] happen. [When drafting contingency measures] always state what circumstances were taken into account when this scenario was provided for. What were the assumptions driving the ‘what if’?”
3. Production information
Establishing a production timeline when drafting a farming business plan is another essential step.
Timelines give a rough estimate of how long the production process is. Whether it is for crops or animal production, it gives you an idea of how much labour, machinery and production capital you need to run your venture.
When planning this part, make sure to include every individual crop or animal production unit, all activities that take place around those, and approximately how long each process should take.
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4. Marketing information
A well-run farming venture is great, but in order for your venture to be successful, you need to make sales. This is why marketing is important. In the previous step, you determined when your crops will be harvested or how long the production cycle of your animals are.
In this step, you plan your marketing around the time you are ready to sell your product. Collecting information on your market, packaging and prices is vital.
5. Labour information
At this point, you have already determined your production timeline, and what you need done. You are now able to assign the type of labour you need for each task, the amount of working hours to assign to each activity, and how long you will require this labour, how much that labour will cost, the cost of transportation and other costs you may incur in relation to your labour needs.
6. Mechanisation needs
Farming machinery is notoriously expensive. Before determining how much it will cost, check your production information to determine how much machinery you will need, what you need the machinery for and for how long you will need it.
Costing analysis involves weighing up how much owning the machinery is against how much it would cost to hire.
7. Management needs
Farmers, especially those who have smaller operations, tend to wear many hats. It is, however, difficult to manage a farming endeavour alone. This is why setting up a good management team can be another essential step to a successful venture.
When gathering information for this section of the plan, consider where in your venture there is a shortage of skills and of time. Garner skills specific to your type of farming and again, analyse how much that would cost.
8. Financial information
At this point, you have a clear outline of what your business would look like, the risks involved and the resources required. The next step is to add up your numbers. When gathering your financial information, be sure to determine your monthly and yearly costs.
If your projected finances do not line up with your pocket or resources, reviewing your plan is your best bet. You may need to rearrange how you want to set up your venture, or take another look at your estimates, or even revamp your entire plan.
For Van Jaarsveld, the most important and basic element of planning a good business plan is clarity of vision. Above all, he says, aspiring farmers need to know why they are going into business.
“The first question [you must ask yourself] is why do I want to do it? Why should I do it? And if you are clear on that, and you were very, very frank and honest with yourself, then you are at the first step for a good business plan.”
Van Jaarsveld also says that a good business plan is more than just drafting figures and presenting cash flow. Without clarity of vision, the people reading your business plan may have no reason to continue reading.
“You [must state] your vision and your mission statements clearly enough, [and if] it’s clear enough for you, then it will be clear enough for me and whoever must look at your business plan for what finances or whatever help you want. The reason for the business plan must be very clear first and foremost to yourself and then to whoever is reading it for whatever purpose.”
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