Develop a Business Plan
A business plan is a summary document that details the business’s purpose, management responsibilities, and key personnel. It creates a foundation for the financing proposal. A good one accomplishes more than these objectives. It proves your case and provides concrete evidence that your business is viable. It is not a novel idea, and it must be written within a limited timeframe. Here are some important tips to help you write a compelling plan.
The management and organization section of the plan should explain who runs the business. Include detailed information on the legal structure of the company. If the startup is a start-up, the legal structure should be clearly communicated. It should also feature an organizational chart that shows how the company is organized internally. It should list all roles and responsibilities, as well as their contribution to the success of the startup. Most of the other sections of the plan should include information about the products and services the business offers.
The next segment of the plan should detail the organization and management of the business. It should include the location of the business and any physical or digital assets it owns. The management team should be profiled, and their resumes should be included. It is a good idea to provide a brief history of the company. A good business plan is a key tool to get your business off the ground and running. With the right guide, you can create a successful business plan.
Moreover, a business plan must have a clear purpose and audience. The reader must understand its content. Avoid industry jargons and slang, and use plain language. Keep the business plan as concise as possible. The more detailed the information is, the more likely it is to be used for its intended purpose. There are many tools to help you write a good business-plan. If you want to start your own business, the first step is to write a plan.
After writing the plan, you should consider your audience and your business goals. If you are writing for an audience other than your investors, you need to keep it simple and easy to understand. You should avoid using industry jargon in the business plan and focus on the audience. Instead, you should make your plan as detailed as possible. Once you have written the plan, you can start writing. It is essential to have a business plan that is easy to read.
In addition to a business plan, there are several sections that must be included in it. This includes the executive summary, the financial statements, and the financials. The final section of the plan should include a detailed description of your products and services. Then, you should outline the advantages of each of these sections. If you are selling a product or service, you should also list the advantages of each. Then, you should highlight the value your customers will gain.
Developing a Business Plan
The most important thing to do when the beginning of an enterprise is to formulate an effective business plan. The name implies that a business plan is an “road map” to guide the direction of the business or venture. The components of a business plan will influence on the daily decisions made and will provide direction for growth or diversification as well as future assessment of the business.
This book will aid you in creating an individual business plan. It provides a description of the structure of the plan as well as the details you require to write the business plan. Business plans are usually created in the hands of the proprietor with the help of family members and people on the company team. The business plans should be “living” documents that should be reviewed and updated each year, or whenever the opportunity to change arises itself. Reviews help reinforce the thinking as well as plans for the business owner and business and assist in the process of evaluating. In the case of a business that is already established an evaluation will determine whether the company requires a change or if it’s meeting the expectations of owners.
Using the Proper Format
The presentation of your plan must look as professional and polished as is possible to present your company in a positive light. When you meet with a potential financier or potential investor your plan is scrutinized to ensure its accuracy. Additionally, suggestions for improvements to the plan could be made. The decision to either recommend an appropriate loan committee, or not to approve the application will be dependent on the business plan. Most loan officers do not have a lot of knowledge about the venture they are considering however they are aware of the proper format of an effective business plan. Investors make their decisions on the basis of the plan as well as the credibility of the business’s owner. Therefore, it is crucial to utilize an appropriate template. When loan officers have completed their assessments then the committee on loans will look over the business plan to decide. The members of the committee will typically only spend a short amount of time looking over the plan, with a focus on the content of both the summary of the business plan and its financials in order to make their choice. Due to this, these sections must be the most important components of the plan. They must also be are based on solid study and research.
Sections of the Business Plan
A business plan must be laid out like an actual book, that has the cover or title page at the beginning followed by the table of contents. After these two pages, the primary parts of the plan usually appear in the following order the executive summary, mission statement goals and objectives, background information, organizational issues marketing plan, financial plan.
The executive summary is usually placed in the middle of your business plans however it should be the final section that is of the plan. The summary outlines the proposed business , or the modifications to the company and the market of which the company has been (or could be) an element. Research findings and suggestions should be summarized in a concise manner to give the reader the necessary information for making any necessary decisions. The summary should outline the direction and the future plans or objectives of the company, as well as the techniques employed to accomplish these objectives.
The summary should contain sufficient background information to back the recommendations. Final financial analyses as well as the assumptions that were used are included in an executive report. The analysis should demonstrate the way in which proposed changes can make sure that the business is sustainable new or proposed business. Every challenge that is faced by the current business or new venture must be addressed within this segment. Being able to identify such issues shows readers that you have considered and analyzed all aspects of your research process.
Mission, Goals, and Objectives
The section is divided into three distinct parts. The first is an overview of the planned or existing business. This is then followed by the mission for the company. Try to keep your mission statements to three paragraphs If you can, and only include the most important ideas as to the reason for which the company exists. A good example of a the mission of a farm or farm could consist of: “The mission of XYZ Produce is to provide fresh, healthy produce to our customers, and to provide a safe, friendly working environment for our employees.” If you’ve got more than three paragraphs try to be as succinct as you can.
Third (and final) section defines the company’s goals and goals. There are at minimum two different views on goal and objective. The first is that the objectives serve as the basis for achieving the goals, while the other one is contrary, with the objective being the methods of achieving the objectives. Whatever school you choose to go to it’s an crucial part of your business plan. The goals and objectives must explain to the reader what the company intends to achieve and the steps necessary to get the desired results. Objectives or goals should be based on an acronym called SMART. SMART is a contraction of Specific, Measurableable, attained, reasonable and Timed. This will enable assessment on the whole process, and to provide useful feedback throughout the process. The business owner must regularly review the results of their the decisions and procedures to determine whether the goals or goals are being achieved and then make adjustments as needed.
The background information should be derived from the research done throughout the research process. This section should contain information on the history of the business, the current situation of the industry, as well as data from reliable sources regarding the future direction of the industry. This section of the plan demands the greatest amount of time and effort by the writer, along with data gathered from multiple sources in order to avoid the risk of being influenced by a bias or a lack of optimism. The author should consider every aspect of the industry (past, future, and present) and the business in consideration. If there are questions or concerns regarding the viability of an business or the industry, these should be addressed. When writing this section in the business plan details is available from the local library and periodicals, company personnel and trustworthy websites on the Internet as well as Penn State Extension. Industry magazines are another great source of information that is current. The more diverse the sources, the more accurate the analysis of the sector and company, and the higher chances of having an accurate strategy.
The business owner has to first decide on a suitable legal structure for his business. The structure of the company has an impact on the future, such as possible expansion and eventual exit from the business. If the correct legal structure is not selected the business could be negatively affected later on. After a decision has been taken about the kind of business, can the plan be made.
The plan’s section provides information on the current or future structure of the business as well as the management team and strategies for managing risk. There are a variety of business structure that you can choose from, such as sole proprietorship, partnerships corporations (subchapter S, or subchapter) co-operative and limited liability corporations as well as partnership (LLC as well as LLP). These kinds of structures are covered in Beginning or Diversifying an Agriculture Business .
The kind of structure for a business is a crucial decision that typically requires the assistance by attorneys (and the accountant). The structure of your business must match the management abilities as well as the style(s) that of the business owner (or proprietors) and be able to accommodate the requirements for risk management (both financial and legal) of the company. For instance in the event that there is multiple owners (or several investors) the sole proprietorship isn’t an option as several people poured time and money into the company. In this situation the co-operative, partnership, LLC, or LLP is the right choice.
If the business isn’t sole proprietorship, the management team must be outlined on the company’s business plans. The management team must consist of all the parties who are who are involved in the decision-making and operations of the company. The strengths and background of the members of the management team should be discussed to highlight advantages of working together. Even if the company is a sole proprietorship, generally several people (often partner, child or a relative or any other person who is trusted) is involved in the business’s decisions, and thus must be included in the group member(s).
No matter what the business’s structure all businesses must have an external support team. The external team of management support will comprise of the company’s lawyer or accountant, as well as an insurance broker or agent or an advisor. External members are an integral component members of the executive team. A lot of large companies employ these experts. Smaller companies, the external management team can replace permanent experts. The business owner(s) should meet with this team regularly (at at least once per year) to ensure that the company is in compliance with all regulations and rules. The inclusion of the management team in the business plan will allow the reader to know that the owner has a team of experts who can offer advice.
The risk management component of the company’s business plan offers an outline of the way the business will deal with unexpected or unanticipated situations. For example, if a company is involved in agriculture production does the company need to buy crop insurance? Does the company have enough insurance for liability? Does the company have enough diversification to safeguard against unexpected events instead of “putting all its eggs in one basket”? If the company has employees, does it have sufficient workers indemnity insurance? These questions must be addressed in the risk management section of your business plan. Additional information on how liability could affect your business and the benefits of using insurance as a risk-management tool is available inside Agricultural Business Insurance and Understanding the Agricultural Liability . The business structure can define a part in the risk control approach as the manner in which the business is organized carries different levels of risk for the owners or the owner. Every marketing strategy (or goals) are accompanied by a level of risk. They must be assessed and mitigated strategies must be included in this section of the strategy.
Each purchase decision the consumer makes is affected by the strategy of marketing or the plan of the business that is selling products or services. Most purchases are made in response to the preferences of consumers which include brand name price, as well as perceived quality characteristics. The preferences of consumers change (and change) as time passes and a successful marketing strategy takes the preferences of consumers into consideration. This is why the marketing plan is an essential to an overall strategy for the business.
To be sustainable, the plan for marketing must be in sync with the production process. The marketing strategy must be able to be able to meet the needs and desires of consumers. For instance, if it is an edible or seasonal crop (such like strawberries) is planned to be grown and sold, the marketing strategy should not include local sales of fruits in January, when the company is located situated in the northern part of the United States. If the company plans to purchase berries during the off-season from sources other than to sell the berries, this information must be included. In this manner the marketing plan should be able to meet the production requirements (or the capacity to purchase products from different sources).
A comprehensive marketing strategy should define your target audience, including the places they reside at work, where they work, and the place they are likely to purchase products or services you’re offering. It is possible to sell products directly to consumers (retail) as well as through a different firm (wholesale). Whichever method you select for marketing when you’re starting your own business or expanding your existing one, then you’ll be required to determine whether the market is able to support more of what you are planning to make. The research you conduct on your industry will help in making this decision. The plan should include a discussion of the difficulties of the strategy for marketing you propose. The section on strategy includes a description of the strengths and characteristics for your item or service. Finding an “niche” market will be extremely beneficial to your company.
Other factors to take into consideration include location of sales, marketing location, promotion and advertising pricing, staffing, and the associated costs for each of these. Each aspect in the plan for marketing take time to create so they should never be considered lightly. Additional information on marketing of fruits and vegetables is available in the Fruit and vegetable marketing for Part-time and Small-scale Growers.
The best way to determine the right answers to the questions of marketing and business is to do an SWOT analysis. The acronym SWOT means SWOT which stands fortrengths, Weaknesses, Opportunities, and Threats. Strengths refer to internal qualities and can include factors such as prior experience in the industry. The ability to sell or market could be a source of strength for a retailer farm market. These weaknesses can also be internal and might include factors such as the amount of time, money and time required to bring a brand new product or service into the market. Opportunities are external factors that can help your business to grow and continue to grow. If no one else is offering the same product or service in your local region, you could be in a position to gain the market. External threats could contain elements similar to those of other businesses that offer the same service that are in the vicinity of your company or regulations from the government that affect cost and business practices.
A financial strategy and the assumptions are essential to the success of a business, and should have a place in the company plan. One of the main reasons that new firms fail is the lack of sufficient capital for their start-up or having the proper plan to cover all costs and earn a profit. The extent of your business will be determined by the sources you have access to. This is why you’ll need to create your financial plan, and also the documents that support the plan.
The financial plan is based on base from historical data (for an operating company) or projections (for the business plan that is being considered). The first thing to consider is recording keeping. You must specify who will be responsible for keeping the required documents and how they are utilized. Internal controls, like the person who signs checks, and who will handle any money, should be covered within this area. One good rule of thumb for any business that are not sole proprietorships is to have at least two individuals to sign all checks.
The following section of the budget must be based on assumptions about the sources of financing. This includes whether (and what time) the company will require additional capital, the amount of capital is required and how this capital can be procured. If capital for startup is required the information must be included in this section. Personal contributions must be listed alongside other sources of funding. The amount and the repayment terms must be disclosed. A common error that affects many companies is the inability to fund their the beginning. The owners often fail to examine all areas of expenses as well as underestimate how much capital required for a startup to get through the stages of development (including living expenses, in case the off-farm income isn’t accessible).
Typically you will find a balance sheet and income statement, statements of cash flows, as well as business budgets or partial budgets are all part of business plans. More details on budgets for agricultural use can be located in Budgeting for Agriculture Decision Making . These documents display financial information in a format that lending institutions have to see. If the documents aren’t created by an accountant, reviewing them by one will confirm that the right formatting has been followed.
Financial projections must be made at least for two years and, best of all over five years. In the agricultural sector the five-year projections can be difficult to create due to fluctuations in weather, prices and other variables that impact production. One method to show these risks is to come up with various scenarios that cover a variety of production scenarios. Attention to detail is often reflected in a positive relationship with lenders as they understand that the plan is able to cover a variety of scenarios and offers an understanding of how the company is able to manage risk. For more information on financing agricultural enterprises can be found inside the document Financing Part-time and Small-scale Farms.
A balance sheet provides a visual representation of a company’s assets and liabilities, as well as the equity of the owner at a particular moment in time. The balance sheet can prepare at any point in time however, it is typically done at the close of the financial year (for most companies, this means the time of the year when the calendar is finished for the year). Analyzing the performance of the business looking at the balance sheets takes many years of balance sheets to provide the complete picture of the company’s growth through the course of time. The balance sheet is usually made up of listing the assets to the left side and owners’ equity and liabilities to the right. The distinction between the liabilities and assets of the business is referred to as”owner’s equity” or “owner’s equity” and provides an estimate of the amount of the company is owned completely by the business. Owner’s equity creates an estimate of the “balance” in a balance report.
Assets are things that is owned by or owed to the business. This includes cash (and balances on checking accounts) and accounts receivable (money due to the business) and inventory (any items or products that the business stores on its farm) and equipment, land and buildings. These could also include machinery breeding stocks small fruit bushes, canes and fruit trees. Sometimes assets are described as current (those can be easily converted into cash) as well as fixed (those which are essential to allow the business to run). Assets are anything that is that is valuable to the company.
Balance sheets can utilize a market basis or cost basis to determine how much assets are worth. A balance sheet based on market basis better represents current economic environment due to the fact that it uses market or current value of the assets instead of the amount they originally cost. Market values are harder to determine due to the difficulty in obtaining exact prices for assets, and frequently results in an increase in the asset’s value. Balance sheets that are cost-based tend to be more prudent due to the fact that the values are usually taken from previous years. For instance, a cost-basis balance sheet will use the initial purchase price for land, rather than the value that the land could fetch in the present. Because purchase records can be readily available, creating an expense-based balance sheet is simpler. Depreciable assets, including tractor, buildings and equipment are included on the balance sheet for cost-basis at the purchase price, less the accumulated depreciation. Most accountants utilize the method of calculating the balance sheet using cost basis. If you decide to utilize cost basis or market basis, it is crucial to maintain consistency over the years in order to ensure precise comparison.
The business has to pay on the day when the balance sheets are created. They include both current liability (accounts payable, any accounts that the business holds with an external supplier, short-term note operating loans, part of the long-term debt which must be paid in the current fiscal year) and other liabilities that are not current (mortgages and loans that have a term that run for one year).
Owner’s equity is the amount left when all debts have been removed of all the assets. It is the sum of money which the business owner invested into the business, the profits which are kept in the company, and also fluctuations in market prices (on the balance sheet that is based on market prices). Owner’s equity can be affected by changes in capital that the company has contributed or there are earnings that are held which is why it is a good idea to treat all earnings as an “paycheck” rather than reinvesting them into the company, the equity of your owner will be affected. In the balance sheet, the owner’s equity and liabilities are equal to assets. In differently that all the properties less any amount due (liabilities) are equal to the equity of the owner (sometimes called “net worth”).
The income statement is a report of income (revenue) and expenditures for an accounting cycle. When the balance statement serves as an “snapshot” of the financial health of the company and the income statement is an “motion picture” of the business’s financial health during a certain time. An income statement is made by listing the earnings (or the revenue) on the upper part of the page, and expense (and the profits or losses) in the middle.
Revenue refers to any revenue generated from the sale of agricultural products or livestock, government payment as well as any other revenue the company may earn (including things like the refund of fuel taxes, dividends from patronage or custom works). Other elements that impact revenues include fluctuations in inventory and receivables that are due between the beginning of the period to the close of the period regardless of whether these fluctuations are negative. Costs are any expenses that the company incurs as a result of the manufacturing of the goods that are sold. Examples of expenses are fertilizer, feed, pesticides and fuel, as well as maintenance and repairs and insurance, as well as taxes and any adjustments to the accounts payable. Depreciation, that is the measurement of wear and wear and tear in the properties (excluding land) is included as an expense in accounting. Interest is regarded as an expense, but principal repayments relating to loans are not considered an expense.
In the process of having the income statement made, the goal is to generate more revenue than expenses, which is why the statement of income shows an income. If there isn’t, the final figure is presented in brackets (signifying the negative value). Another term for this type of financial document is “profit and loss statement.” These statements are a way to show clearly the extent to which the farm makes advancement from one season to next . They can provide a more positive outlook on sustainable development than could be seen through the balance sheet of a single year.
Cash Flow Statement
A cash flow statement shows the anticipated flow of cash that flows into and out of an organization during the course of a calendar year. Cash flow statements are created by displaying the total sums expected for each type of revenue or expense. The total is then divided into months to indicate when surpluses and shortfalls in cash will happen. This way the cash flow statement could be utilized to determine the time when cash will be needed and also when the company will be able to repay any debt. The monthly predictions allow owners to owner(s) to evaluate the cash requirements of the company by taking out the appropriate loans and the repayment of the outstanding debts. In the cash flow report, one typically utilizes the same categories as the income statement but adds additional categories for loans and debts.
Once these financial statements have been complete and the business plan’s writer will have a complete image of how the company has performed and the performance of the company in the next year(s). With this data as a basis, the owner — and any other readers of the business plan will be able to assess the sustainability of the business and gain a clear understanding of the actions and processes that will help to ensure its viability. This knowledge will allow owners to owner(s) to come to more informed decisions about investment or loans within the business.
Putting It All Together
Once the mission details, background information, organizational and marketing plans are in place An executive summary could be created. Based on the research findings and other information from other sections, the company will be able to come alive in this section. It is the next stage to discuss the plan with those who you trust in your opinions. They should ask tough questions, forcing you to defend an opinion you’ve stated or requiring your to write down the actions you intend to take in greater in detail. Most people are reluctant to share what they’ve written to their family or their friends due to the fear that they will not be considered serious. It is, however, much better to get positive feedback from your family members and friends (and get the chance to build your plan) instead of having to submit it to the lender only to be identified and then receive an unwelcome rejection.