Are you just starting out? Are you growing your breeding program and needing to get bank financing? Maybe you’re transitioning to the next generation. Whatever your situation a well-thought-out business plan is the vehicle you need to get you there. Like any other viable business, your farm is more likely to succeed with a written business plan.
For many the thought of taking the time to write a business plan seems too daunting. There are so many other things that need to be done. But that is exactly the reason you need a business plan. With so many things that can impact your dairy operation, you need to know how to steer through the issues. The following are just a few reasons why your farm needs a business plan:
- To avoid big mistakes: The last thing you want to do is work on something year after year , only to realize you were doomed from the start to fail. That is exactly what can happen to many dairy operations. Because they don’t take the time to plan everything out, they don’t account for all the potential mistakes they could be making. Instead, they try to “change” the plan as they go along. The problem was there never really was a plan to start with. Developing and sharing a business plan can help ensure that you avoid the hurdles and sprint down the right path.
- To counterbalance your emotions: If you are like many dairy breeders you are very passionate about your ideas. The problem is this driving passion can make you susceptible to losing sight of reality. It’s a lot to carry on your shoulders. There are times that you may be overwhelmed by doubt, fear, or exhaustion. When your emotions get the best of you, having a business plan lets you step back, and take an objective look at what you are doing and why, what you know for a fact and what you are trying to figure out.
- To make sure everyone’s on the same page: Chances are, you are not building your farm by yourself. Ideally, you’ll have family, children, maybe even parents involved. A business plan helps get everyone involved and heading in the same direction. There is nothing worse than find out part way down the road that someone on the team had a different plan than you did. When I was in University, many classmates went back to the family farm. Now some of them were very wise and established a plan before going back to the farm. However, others didn’t and now find themselves lost and facing an uncertain future.
- To develop a game plan: Dairy farming is a business. Breeders forget that at their peril. As with any sustainable business, execution is everything. That means you have to set priorities, establish goals, and measure performance. You also need to identify the key questions to answer, like “What will we specialize in?” “Will we breed for profit or personal genetic gain?” and “What is the next generation transition strategy?” These are all things you’ll address during the business planning process.
- To raise capital. If you raise or borrow money—even from friends and family—you’ll need to communicate your vision in a clear, compelling way. A good business plan will help you do just that. A good business plan will not only make it easier for you to get the financing you require to achieve your goals, but oftentimes it will help you achieve lower financing rates, or qualify for a larger amount of financing.
More often than not, dairy producers have a basic business plan for their farm, but they certainly don’t have a plan for their genetic programs. They may have some basic ideas about what type of cow they want, or what are their minimum requirements for sire selection, but they haven’t sat down and developed a clear genetic program. This means setting measureable goals from start to finish. What sires they are going to use. How will genetics play a role in herd profitability? What type of cattle will be needed in two years. You see the breeding decisions you make today, typically won’t affect your profitability until two or three years from now. This is especially true if you are planning on selling genetics (embryos, calves, bulls…). You need to have a very clear plan. These ventures require a significant financial investment, and no financial investment should be made without a clear understanding of exactly what the expected return is.
The Bullvine Bottom Line
Of course no plan is any good if you don’t follow it. That doesn’t mean you cannot change the plan. Actually, I think the plan should always be adjusting. The marketplace is always changing. A clear but flexible plan is exactly what you need to steer you through the good times and the bad times. Plan on it!
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