Planning a farm for success
Planning acts as the framework that is necessary during the disposition of the assets at the time of the owner’s death. However, for the farmers having a proper estate plan serves a big purpose. For growing the business it is very necessary to have perfect management and business planning. After the death of the farmer, he is assured of having a smooth business flow with perfect planning for the activities. The proper planning will provide security to the family members even to those who are not actively involved in the farming business. However, having the farm plan is complex and is very important through which you can easily survive in the legal market.
Importance of farm planning
In the next decade, it is predicted that one-fourth of the nation’s agricultural land is likely to change. However, the value and productive lands will be converted to have various other purposes. Farm planning is necessary as it is important for farmers to remain available for agricultural purposes. On the other hand, the family that is having the desire to keep their family in the farming industry then the farm planning is necessary for them. The established legacy is also maintained with the help of business planning.
What are the goals of farm planning?
Mainly there are four goals that good planning should accomplish. So, farm planning involves the following four goals-
- Transfer of ownership to new operators along with management
- Income, gift, and estate tax are to be avoided
- Assurance of financial security and peace of mind with the new genre
- Cultivation according to the next generation management rules and capabilities
Thus, with the will of promoting the farm business and planning, the goals are also necessary. This is because only the plan will not guarantee the secure future of the family with the family farm business.
How to have proper farm business planning?
People are not able to decide from where to start a business. They are planning but for the execution of the plan, they are having much confusion. However, following the below-mentioned steps will give you a clear and effective path to start a small farm business. Thus, the steps are as follows-
The beginning of the plan begins with a family business meeting where you would discuss the assets and goals for the business. However, it is important to know the family values and the history of farming in the family.
The next step is to asses the goals for the business which may be done through self-assessment including marketing production and financial management skills. This is important so that you can give responsibility to each member of the family. If none of them have any expertise or skill regarding these areas then you have to outsource the people. You may also opt for training and education on agribusiness.
Analyze the goals
Analyze the availability of the following resources- management, profitability, business structure, operating procedures, land, labor, and various others. Analyze the current position of your business depending on which you can decide the further key goals. Ask other family members about their individual goals related to agri-business. It will help you in determining the responsibilities that each member should take in order to achieve the goals.
Your business has a reason to exist so tell this reason to everyone by having a mission statement for your small farm business. A mission statement is important because it defines the values your family has which helps them to put your business further.
All the above-mentioned points were the internal analysis for your business plan. Now it will be easy for you to develop a plan that will focus on all the areas of the farm operation. Develop a plan that will support the operating practices and boost production. Moreover, you should have a plan for other sectors of agri-business such as financial risk management, marketing, and personnel. Analyze each sector and identify threats and weaknesses. Also, identify the strength and opportunities available in those sectors.
The retirement plan is also essential for your agri-business. As you have to take care of your retirement needs as well. However, it is as important as your business plan for all family members. The profit earned from the business should be sufficient enough to support the retirement needs of each member without affecting their financial position.
A transition strategy is also important for your family agri-business. This is because you can transfer the business to the next generation. The transition strategy should include the way of transferring knowledge and asset to the next generation.
In the case of the principle, the operator dies how will be the assets distributed between the other members. All such planning should be planned beforehand in your estate plan.
Investments are also necessary for buying machinery, livestock, and land. Other than these investments, there is much planning that you must do for other exterior operations as well. These investment plans may affect your future needs so make the plan very carefully. Even with the best investment, you enhance the profit that you will get in your business. Thus, it is very important for having the best and efficient investment planning.
Set up different goals in each area
You must have a plan for each area in which you are dealing so that you can achieve a goal for that specific area. However, the goals should be measurable and you should review the goal in each monthly family meeting. Depending upon the results you can make a few adjustments in the goals and act accordingly.
Get ready for unexpected situations
While starting a business it is certain to have some unexpected situations that can make things go up and down. So get ready to deal with those situations which affect your business goal. You will get easy protection from the unnecessary losses.
The risk associated with farm planning
There are various risks which are associated with having the best business planning. However, these risks should be managed with the help of different strategies. The risk management stabilizes the income of the farm that is kept. On the other hand, there are various tools and strategies through which you can easily stabilize the risk which is involved. The risks which are there stated as under-
Most importantly the farm business is having various production risks. If the risks are there they are having the possibility of changing level of output. However, production risks arise from adverse weather conditions. This is due to the reason that they have an adverse effect on the production cycle of farming any product. There are many strategies through which you can easily manage this type of risks-
- Must follow the recommended development practices
- Develop crop varieties
- Expand the production of the food
- Purchase the federal crop insurance policy
In this type of risks the farmers are dealt with having the possibility of loss for the products. However, the problem of not getting the accurate amount as expected comes under the marketing risks. Lower sale prices give rise to a large number of competing growers that are changing their preferences. Even this occurs due to inappropriate packaging of the seeds that are provided in the market. This type of risk should also be managed by the following strategies-
- Develop the best market plan by sales forecasting
- Join the marketing cooperative to enhance the prices
- Spread harvest and sales over the season
- Conduct essential market research
For meeting the obligations in business the farmers require to have sufficient funds. However, when you are generating the profit which is low then you may lose equity in the farm. There are many sources of having financial risks. Even this risk is commonly the result of the production and the marketing risk that arises. You must protect your farm business from the risks that are associated. The strategies that need to be followed for the risk management are as follows-
- Have a static business plan
- Measure all the financial ratios
- Control the revenue expenses
- Evaluate and expand different enterprises
There is involvement of many risks in fulfilling all the agreements and contracts of the business. Failure in meeting all the agreements will offer you to carry high costs. This will even cause injury to another person in case of property negligence. The risks are associated with environmental liability which is concerned with the water quality and its use. The strategies that are used to manage such type of risks are-
- Review all the insurance policy
- Choose a various business structure
- Develop good relations with the neighbors
- Have enhanced agricultural practices for the environmental risks
Thus, these are some of the risks which are associated with the small scale farm business. You must tackle all such risks which are there. So, have the perfect business planning and enhance the growth and working of the business.
Ready for the next step to become a farmer ?
So you manage to overcome your fear? Then let’s go to the next point and learn the planning !
Source : Farmer