Published Jun 8, 2012

Real Life Business Plan Vetting from PFI 2012 Annual Conference Report
By Luke Gran

Practical Farmers of Iowa beginning farmers are seeking more understanding of the business plan, and how farmers complete and continue to use one to aid their farm. PFI held a session at the 2012 Annual Conference with two beginning farm businesses presenting their plans to a panel of business experts. Prairie Sky Farm’s Sara Hanson, a vegetable farmer, and Wild Rose Pastures’ Ryan and Janice Marquardt, a grass-based mixed livestock direct market farm. Special thanks to Jon Jaffe, of Farm Credit Connecticut, and the Carrot Project, Renee LaBarge, of Lincoln Savings Bank of Traer, Iowa, and David Miller of Working Farms Capital of Illinois for participating in this session.

Ryan and Janice began the session and presented their business plan following this outline:

  • Business History
  • Goals and Objectives
  • Marketing
  • Competitive Analysis
  • Points of Sale
  • Key Plan Assumptions
  • Strengths Weaknesses Opportunities and Threats (SWOT)
  • Market Potential
  • Pricing

Their business, Wild Rose Pastures, began in 2007 selling poultry directly to consumers. Over the years have included more products as they have expanded their number of customers. Janice and Ryan both work off of the farm to bring in family income. They raise grass-based livestock broiler chickens, eggs, turkeys, beef cattle, and lambs. Their business grew slowly, building customers while they worked to access land and scale-up their production. They did not take on any business debt other than a farm mortgage. Instead, they chose to invest earned income from off-farm employment into the farm infrastructure to increase production capacity and efficiency.

They operate their business with goals and objectives from short-term goals like building fences, to long-term goals, buying additional land. Most of their marketing is word of mouth. They distribute to the Iowa Food Cooperative, on-farm sales, and planned deliveries throughout the year. Their website is a big part of their marketing including an online store and regular blog updates help communicate to customers.

The panelists recommended the Marquardt’s include some costs in their plan that they left of including interest expense, repairs and maintenance, insurance, and land expenses that are the farms (like sheds/buildings). Jon Jaffe recommends all beginning farmers always look over a plan from the big picture to be sure it all makes sense. A small math error can take away credibility of the whole plan. Renee LaBarge recommended the business should survey customers more frequently using free services like SurveyMonkey in order to gauge customer satisfaction, willingness to pay for the product, and research and develop new offerings. David Miller encouraged the business to try to lease additional land as opposed to purchasing land right now due to high land values and allow the business to grow more. David also recommends business plans should include five year projections of sales and expenses to show the business growth needed to achieve a sustainable income for the farmers.

Watch the full video business plan presentation online at: http://www.youtube.com/watch?v=8qE6htLN3EY

Sara Hanson’s business, Prairie Sky Farm, intends to grow certified organic produce for wholesale markets – grocery stores, and restaurants with the aid of a high tunnel greenhouse to extend the season and improve quality.

Business Plan Outline

  • Proposal to invest in Prairie Sky Farm
  • Background
  • Family and Business History
  • Market Opportunities
  • Marketing Goals
  • Internal Strengths and Opportunities
  • Internal Weaknesses and Threats
  • External Strengths and Opportunities
  • External Weaknesses and Threats
  • Mission Statement
  • Intermediate Goals
  • Long-term Goals
  • Farm Balance Sheet
  • Sales Projections for 2012
  • Enterprise Budgets

Sara has compiled a decade of work experience in farming to prepare her to run her own farm business. She shared a price list of the crops she can grow and what her markets are willing to pay for them at wholesale values. From this, she knows which crops she can produce at a profit, and which ones she will not grow for those markets.

Like many beginning farmers, Sara works off-the farm as her business develops. She works early mornings and late nights to get crops harvested and farm work done.

One of her major constraints is labor – her farm is located several miles from the nearest small town, several hours from a large metropolis, and the available qualified labor pool is restricted due to aging residents and a lack of young people.

To solve labor challenges, Renee LaBarge recommended Sara look for volunteers in high schools, churches, 4-H, FFA, because Sara has great skills to share with the next generation and kids all need community service hours to get special recognition from schools for graduation day.

The diverse advisory team Sara identified in her business plan impressed Jon Jaffe. This included her accountant, farmer mentors, friends and family. Jon also recommends Sara should track her marketing time and include in the business plan the costs of delivery and methods of distribution of products.

David Miller recommends Sara should think big, maybe put up another high tunnel at some point soon, and discouraged her from renting out her land for hay – the opportunity cost is very high, she might get $100 per acre to rent out land for hay – it would be so much more valuable to get it into vegetables as soon as she can. Also he recommends Sara should move to a 30-year mortgage for land to make monthly payments lower. This would free up more cash in the early years of the business. There are no penalties to pay off a 30-year mortgage faster!

Watch the full video business plan presentation online at: http://www.youtube.com/watch?v=22Rz6Na2wVI&feature=relmfu

Look for another session on Real Life Business Planning to come this January at the PFI Annual Conference January 10-12, 2013 in Ames, Iowa.