Planning for profitability: Getting started with farm business planning

Agricultural Management Institute
Planning for profitability: Getting started with farm business planning
Planning for profitability:
Getting started with farm
business planning
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
more paperwork!?!
For many farmers, the last thing they think about when it comes to running their farm
business is developing a business plan. In fact, according to a 2011 study by Ipsos
Forward Research for AMI, only 22 per cent of Ontario farmers reported having a farm
business plan and of those, less than half update their plan regularly. This could be
because they’re too busy with the day-to-day running of their operation to find the
time, they fear the expense or they don’t know where to start with the process.
…only 22 per cent of
Ontario farmers reported
having a farm business
plan and of those, less
than half update their
plan regularly.
According to a 2011 study by
Ipsos Forward Research for AMI.
This booklet will help address all three of these areas by taking a look at the benefits
of planning, what the process might include, how to get started and where to go for
more information.
Taking part in a business planning process does not have to be a complicated, timeconsuming undertaking and there is no one solution that will fit every farm business.
Some farm businesses will come out of a planning process with a comprehensive,
detailed plan for succession or expansion. Others might start by jotting down a few
ideas on how to expand production, create a better work-life balance or restructure
debt, and then take their initial ideas to a trusted advisor to start creating a plan.
Agricultural Management Institute
Planning for profitability: Getting started with farm business planning
Why you might want to consider a bit of planning
Farm business planning can be done on your own, with the help of your
family, business partners or farm staff or in conjunction with a professional
farm business advisor. Whichever route you take, planning can bring
many advantages to your farm operation.
Planning allows you to prepare financial forecasts for three to five years,
based on optimistic, neutral and pessimistic outlooks. This helps you
consider risk mitigation strategies as well as identify and manage risks,
and make production and marketing decisions.
It can build awareness of the challenges and opportunities, helping
you avoid major problems, address market upheavals or seize new
opportunities, as well as present the opportunity to sell your business
story to your lender or to higher-up account managers that might be
involved in financial decisions affecting your farm.
Planning can also identify strengths and weaknesses in your operation,
force you to self-assess and prioritize, help set and achieve short or long
term goals, and plan for succession. Your document does not have to be
lengthy, but it does need to contain concrete ideas, goals and milestones
to help you plan, track and achieve your objectives.
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
More than just a plan...
or branding options, or consider using risk management tools.
The farm business planning process doesn’t have to be very formal or
complicated, but it can help bring positive change to an operation. A
business plan is more than just a static document that sits in a binder on
your desk. It’s also:
Applying for financing. A plan will help you obtain financing, but will
also help you take a realistic approach to farm finance and debt loads.
A road map. A plan will help guide your business as it changes or
expands. You wouldn’t build a house without a blue print, so why run
your business without a written plan?
An accountability tool. It’s much too easy to avoid or forget doing
something if it’s not written down somewhere. Try marking milestone
dates and actions on your calendar throughout the year to help keep
on track and measure accomplishments.
Working with partners or communicating with staff or a management
team. A plan defines agreements between partners regarding roles
and responsibilities, commitments and shared goals and objectives.
This could also have positive personal life implications, such as being
able to work off-farm less, spending more time on-farm or having
some weekend time off.
Appraising or selling a business. A solid plan will make your business
more attractive to potential buyers or help you implement a
succession plan.
A safety net. Many people have a good business plan in their head
but in case of unforeseen circumstances like an accident, it also needs
to be on paper in order to keep the business going in your absence.
A communication channel. A common vision helps your team stay
connected and on the same course.
An investment. Planning takes time and money, but it can also help
you streamline or expand your operation and make you more profitable.
Key topics in your business plan include a financial plan, goals and
objectives for your operation, succession and risk management plans,
as well as plans for commodity and direct marketing, diversification and
human resources management.
Who needs a business plan?
You need a business plan if you’re:
Running a business. A plan can help guide you as you expand,
diversify into different product types or markets, evaluate processing
“You need to have a business plan. Whether
it’s one year or longer, that’s entirely up to
you but you need to be backed by somebody
outside the business to get a perspective on
it. It doesn’t matter if it’s your banker, your
accountant or whatever, just somebody that
doesn’t have the emotional tie to it to give you
an opinion.”
Welland-Area Farmer
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Where to find advice—working with farm
business advisors
Planning for profitability: Getting started with farm business planning
Jim’s top tips on how to get the most out of your farm
financial advisor
There are a variety of places you can find advice on farm business
management planning: for example, from the links at the back of this
booklet, by taking a Growing Your Farm Profits workshop or by seeking
the help of a farm business advisor.
Provide good financial information. Keeping your financial
statements and records current and up to date cuts down on the
amount of time an advisor needs to get up to speed on your operation
and helps give him or her an accurate picture of your financial position.
Jim Tyler has been farming on his family operation near Stratford for almost
40 years. For the last two decades, he’s also been helping fellow farmers as
a farm business advisor. About half his work is spent helping debt-stressed
operations find solutions to their financial troubles and the other is working
with farmers to plan for expansion, succession or intentional downsizing.
Keep production records. This includes how many animals you have
marketed per year and their average price and weight or your crop
insurance records from Agricorp. Good production records will help
your advisor develop a plan that reflects the realities of your operation.
“As advisors, we bring outside experience to a situation and help farmers
sort through options in an objective way,” explains Tyler. “We can offer a
third-party, outside opinion that can help if a farmer has been looking at a
situation too closely.”
Many farmers are production-oriented and most don’t enjoy paperwork,
he says, and so they only deal with financials when they have to. Farms,
unlike large companies, don’t have people on staff to help with strategic
direction. Since it’s human nature to be reactive instead of proactive, it can
take an issue like debt, a new project or a son or daughter coming home
to farm to kick-start the process, he adds.
An advisor can help with a very specific project or plan but in an ideal
situation, Tyler says, a farm advisor works closely with the farm operator on
an on-going basis and is on-call every six to 12 months to review financial
statements. This should be separate, though, from working with a chartered
accountant to get tax advice, as a tax specialist may not necessarily have
the expertise needed to analyze how farm production and finance meet.
Take a Growing Your Farm Profits workshop. Through the
workshop, you will be tasked to think and talk about issues you’ve
maybe never addressed before. Deciding where you want your farm
business to go and defining your goals helps you mine the advice you
need to reach those goals.
A farm visit is essential. Anyone writing a business management
plan for your farm should come out to visit your operation at least once.
The advisor will have a better understanding of your operation and your
situation if they’ve taken the time to meet with you face to face.
What’s a “Growing Your Farm
Profits” workshop?
A two-day interactive workshop to assess current farm management
practices, identify priorities and develop action plans. Successful
participants may be eligible for cost-share funding for advisory services
or skills training.
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
steps to a business plan
Answer the following four questions as best you can:
“Where are we now?”, “Where do we want to be?”,
“How do we get there?” and “How do we know we’ve
gotten there?”. Include all the goals or objectives you
may want to reach in the next three to five years. This
can be done by yourself or with business partners,
family, staff or a farm advisor.
Write down the strengths, weaknesses, opportunities
and threats for your farm business. Strengths and
weaknesses are internal factors that you can control;
opportunities and threats are external characteristics
that are beyond your direct control but can affect your
Start writing out your plan
sections: strategic plan (inc
objectives, vision and miss
analysis), operating plan (d
as production, marketing a
succession plan (what sho
farm operator is injured or
Agricultural Management Institute
using three main
clude things like goals,
sion statement, situational
day-to-day activities, such
and financial plans) and
ould happen if the main
passes away).
Planning for profitability: Getting started with farm business planning
Seek the advice of a peer or professional farm
advisor for an unbiased, third party assessment of
your plan.
A farm business plan is an active document that
should be reviewed regularly. Don’t be afraid to make
changes. Mark dates in your calendar to assess
milestones, arrange meetings and touch base with
how you are doing with sticking to the plan.
For more business planning templates and resources, visit
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
Case Study: Business planning for biomass
A good time to start down the road of business management planning is
when a new opportunity presents itself for your farm business.
The Ontario Biomass Producers Group began in 2009 when Ontario
Power Generation started looking for renewable resources of energy and a
group of farmers decided to investigate biomass opportunities. Biomass is
purpose-grown energy crops like miscanthus and switchgrass.
The planning process quickly took them from power generation to a
completely new level of possible opportunities for biomass, including
pelletized furnace fuel, particleboard, livestock bedding, mushroom
substrate and even plastic containers and car parts. The group has now
evolved into a co-op with 30 active members and is still growing.
“Farmers are trying to position themselves for something that has the potential
to be a very rapid growth opportunity for renewable energy production and
bioproducts,” says Nancy Comber, the group’s secretary. “Through many
meetings and planning, they’ve really been able to move this forward.”
Co-op members can access support from the co-op to help develop
a business plan for a specific biomass opportunity they are looking to
pursue. This service is offered to members through project funding from
AMI, which helped the group hire two business advisors to assist with
market research and planning efforts.
“Planning is a fundamental component of developing this industry. The
adage “if you fail to plan, you plan to fail” really applies here,” says Comber.
“Business planning can help show the viability of biomass and motivate
farmers to explore the potential of this diversification.”
The group is finalizing a biomass business planning manual, which will be
available at
“As we move through the process of business planning,
new opportunities are coming forward. There’s something
new at every meeting that people have found or researched;
it’s a very exciting time for biomass in Ontario.”
-Nancy Comber
Case Study: Bonnieheath Lavender
As the tobacco industry declined, Steve and Anita Buehner knew they
wanted to do something else – and they wanted that something to be in
agriculture. A friend introduced them to lavender in 2003 and although
they experimented with some varieties for several years, it wasn’t until
they attended a lavender conference in the U.S five years later that they
got serious about this emerging niche. They also became involved with a
group of local growers who were planting grapes, a new crop in their area.
Today, Anita has returned to work on the farm full-time with her husband,
and the Buehners produce apples, grains, grapes and lavender on their
180 acres in Norfolk County.
Anita credits their careful planning with the successful re-birth of their
farming business, which now includes lavender-based agri-tourism and
plans to open an on-farm winery. She and Steve both took an intensive
Agricultural Management Institute
Planning for profitability: Getting started with farm business planning
computer course at a local college, and Steve completed the Growing
Your Farm Profits workshop, allowing them to access funding for further
farm business management activities.
“When you move on from a business you know so well and go in a new
direction, computer skills are very important and they’ve turned out to
be key in what we’re involved with now,” explains Anita. “We started the
planning process with a farm financial assessment. It was very helpful to
have an independent person tell us where we were and whether we could
realistically move forward with our project.”
Anita also took advantage of an opportunity offered by Farm Credit
Canada to evaluate some online farm business management courses
they were developing. She had never taken any online training, but has
found the process to be extremely helpful in the later stages of their farm
business planning.
“We took our time to evaluate our personal goals and business,
look at our strengths and weaknesses, and identify potential
customers and future opportunities, so when it came time to work
with a certified farm advisor to formalize our business plan, all
the background work was already completed,” she says. “Most
importantly, we realized that we had a desire to repurpose our farm,
which gave us the focus we needed to undertake this immense
“Transition is a long road. Planning can be very time consuming and
we wouldn’t have been able to do all of this without the resources
we were able to access,” admits Anita, who is now also chair of
the newly formed Ontario Lavender Association. “Some of these
conversations are not easy ones to have, but developing that focus
is so important when you’re making these major changes.”
Anita’s transition planning tips
Successful change requires focus.
Use free online resources to help you get started.
Hire a professional advisor to help you with planning and give
you outside perspectives.
Be prepared. Money can be tight when you’re in transition
and being prepared before you seek out an advisor will save
you money.
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
I’d like to get started – where do I go for more information?
The following websites and resources offer information and tools that can help you get started with building your own human resources management plan
for your farm, help ensure you are aware of your regulatory compliance obligations as an employer and recommend sources for further advice and support.
Preparing your business plan
Finding an advisor to help you
Preparing business plans, OMAFRA:
Choosing a business consultant, OMAFRA:
AgPlan—online business planner tool:
Farm advisor listing:
Create your own business plan:
Canadian Association of Farm Advisors:
Strategic and Business Planning:
Sample business plans
Livestock producer case studies,
Iowa State University: Advanced business planning 4-H conferences:
Advanced business planning, OMAFRA:
Business Strategy:
Farm business plan guidelines,
government of South Africa: Advanced business planning
Feasibility studies “Does this idea make economic
Agribusiness Planning—Providing Direction for
Agricultural Firms, Penn State University: sense?”, University of Manitoba:
Algoma Farmers’ Market feasibility study
and business plan:
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Planning for profitability: Getting started with farm business planning
Training and workshops
C Team, George Morris Centre:
AMI Advanced farm manager:
Growing your farm profits workshops:
Keeping your plan up to date e-team videos, AMI:
Business plans are especially important for farmers considering
diversifying their operation through value-adding.
To access these and other resources, visit
OMAFRA’s new Exploring Value Added Opportunities (EVAO)
training program helps rural entrepreneurs assess what it takes
to turn an idea into reality by completing some basic planning for
production, marketing, finance and human resources.
For information on EVAO videos, workshops, and e-learning
follow the Adding Value Through New Products or Services link at
This book and any resources and links contained herein are not intended to be used as a substitute or
replacement for the Acts described herein. It does not cover all situations or circumstances when you
have employees on your farm. If your business is setup as a corporate entity, there may be different or
additional obligations. This publication is intended to provide a farm owner with a simplified overview
of regulations contained in these Acts and to provide resources should you require further information.
Professional advice should always be sought from your legal representative or accountant when looking
for an interpretation of the legislation.
Planning for profitability: Getting started with farm business planning
Agricultural Management Institute
AMI can help!
For more information about farm business planning resources, visit
or call the Agricultural Management Institute at 519-822-6618.
AMI is part of the Best Practices Suite of programs for
Growing Forward, a federal-provincial-territorial initiative.