Your neighbours are working the same soil as you and have the same weather, but their business goals and their break-evens will be different — maybe much different

“You’ll benefit from identifying even a few short-and long-term goals and getting them down on paper.

—ROY ERICKSON.

Midwinter is a good time to put some thought and detail into your business plan. Clearly defined goals can help you keep your business on track this year. PMG AgCoach Roy Erickson says, “Many producers have ideas in their head, but it’s too easy to lose track of where your business is going that way. Putting a business plan down on paper is an interesting process. One of our producers went to the trouble to build a full five-year plan, but that’s unusual.”

To make your business plan fit your operation, don’t look across the road at what your neighbours are doing. Too often I see producers base their decisions on what their neighbours decide to do. In this respect, we’re not like other industries. Sure, we wear our business on our sleeve, and our work is in the field where everybody who drives by can see it. But every farm is a custom operation. You want your business plan to reflect your set of circumstances, your goals, your initiatives — not those of your neighbours.

“First-time planners will want to keep it simple,” says Erickson. “You’ll benefit from identifying even a few short and long-term goals and getting them down on paper. Start by asking yourself, ‘Where do I want to be in farm size three years from now?’ If you include agronomics in your plan, you’ll need to build in a lot of flexibility for changing disease and pest conditions. Thinking through what-if scenarios will help you make good decisions a lot faster when the pressure is on.”

Don’t be tempted to hire someone to do a business plan for you. Plans done by other people become dust collectors. Do your own business plan and buy into it. Some producers shoot for the ultimate plan that covers every detail, but that isn’t the way to go for most.

“Some people have a plan for their whole life from the time they leave university until they retire,” Erickson says. “These people are very precise and goal-oriented. Maybe they want to retire at 45. Their whole life is geared toward that goal. But farming has so many variables that need to be accommodated as they pop up. You’ll do well to identify several long-term goals, those important goals that at retirement, you and your successors, if that’s the case, will feel good about reaching.”

If expansion is the name of your game, a well-thought-out business plan will impress your banker. “Bankers would be happy to see a growth plan with definite goals and the numbers laid out for each year,” says Erickson. “Include how you’re going to achieve those goals, and get right down to the nitty gritty — like pieces of equipment you’ll need to replace. But you’ll still need to build in flexibility that will allow you to identify a good deal and take advantage of it.”

TAKE TIME TO MAKE ESTIMATES

Estimates are the basis of a business plan. If you’re thinking estimates are a waste of time, you’re dead wrong. You want to refer to your estimates all year long. Your estimates on the cost of seed, fertilizer, pesticides and maybe land rental and labour can tell you two things: where you are and where you’re headed. In these volatile times, you can’t afford to take your eye off the ball.

In the past year, very little could be considered “normal.” If you made a business plan last year, pull it out and review it. Hindsight can be a good thing. How did you react to high fertilizer prices last year? What resulted from those decisions? Try to gain some insight into how you managed your growth and made your marketing decisions. Maybe you’re a grower who is disgruntled with the fact that you based your marketing decisions on emotions rather than facts. A business plan can help you stick to the facts.

“Go back to your plans and make some comparisons,” Erickson says. “We’re seeing lower gas prices now. The last time we saw oil at $40 a barrel, what was the price of gas? Last time wheat was $8 per bushel, how were you operating your business? Did you meet your own expectations? Was your marketing successful?”

A lot of farmers wish they had done more selling last spring and summer. They’re looking back with a lot of regrets. But successful farmers are looking ahead. They’re not worrying about what they missed. They’re ready to work with $7 wheat.

“Missing the highs isn’t the end of the world,” says Erickson. “Wheat is hovering around $7 a bushel, but long term, prices for wheat will probably remain fairly high. Work with your numbers, get your business plan together and you’ll feel a whole lot more confident heading into the new season.”

Need help? To you get started, business plan guides are available on the Internet and through farm centres and workshops. Remember, you don’t have to do everything at one fell swoop. Just make your business plan your own. It’s a new year and a fresh start on next season. PMG wishes you every success in 2009.

Gary Pike is president of PMG. PMG provides management, marketing, business planning advice and coaching to members who represent 2.5 million acres in Western Canada. To find out more about PMG and how to become a member, visit www.agcoach.caor call us toll free at 1-877-410-7595.

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