Creating a Farm Business Plan
A comprehensive business plan guides decision-making and secures financing. Include executive summary, market analysis, production plan, marketing strategy, financial projections, and management structure.
Enterprise Budgeting
Calculate costs and returns for each crop or livestock enterprise. Track direct costs (seeds, amendments, labor) and allocate overhead (land, equipment, insurance). Knowing profitability of individual enterprises focuses efforts on high-margin products.
Accurate record-keeping reveals which crops, markets, and practices generate profit versus those that consume resources without adequate return. Eliminate or scale back low-performing enterprises.
Pricing Strategies
Price products to cover all costs plus reasonable profit. Research local market prices, but don't automatically match lowest prices. Quality, certification, and customer relationships justify premium pricing.
Calculate break-even prices and refuse sales below that threshold. Discounting devalues your products and unsustainably squeezes profit margins. Focus marketing efforts on customers who value your offerings appropriately.
Cash Flow Management
Agriculture has seasonal income but year-round expenses. Project monthly cash flow to identify periods requiring operating capital or off-farm income. Build reserves during high-income periods to cover low-income months.
Diversify income streams to smooth cash flow - combine farmers markets, CSA, wholesale, value-added products, and agritourism. Multiple revenue sources reduce reliance on any single market channel.
Financial Benchmarking
Compare your farm's financial performance against similar operations. Track metrics like return on assets, operating profit margin, and debt-to-asset ratio. Identify strengths and weaknesses relative to peers.
Participate in farm financial management programs that provide confidential benchmarking data and consulting support. Many university extension services offer such programs free or low cost.