Building a new dairy barn, whether a freestall barn, transition cow barn, or calf facility, comes with some excitement, cost and return considerations, and time spent planning. From projecting out animal needs and reviewing detailed construction plans, the time spent planning is valuable, even considering unexpected changes that may occur during construction. The time and effort spent on plans across the conference table or kitchen table can help to create the best possible facility, built at the lowest cost. Without planning, details may be missed leading to less than desirable facility attributes and lower animal performance when completed. Without planning, changes during the construction phase may result in cost overruns that “break the budget.” Planning helps to achieve the greatest return on investment when building new barns.
So, if you spend time planning for your barn, why not spend time planning for your business? The benefit of planning in a dairy extends well beyond simply new barn construction to a complete business plan for the whole operation. A good business plan provides a roadmap for success and aids in decision making. A good business plan is the foundation for excellence in productivity and profitability. Whether maintaining, growing, or diversifying your operation, a business plan not only provides the key details needed internally to manage various enterprises, but also provides external advisors and lenders with a professional image of your business and information to help your business be successful.
All dairies should consider developing a new business plan or updating their current plans, but it is especially critical during times of change. Management success and transition of the business can be guided by the business plan. New ventures or diversification of enterprises can be guided by the business plan. Smith et al. (1) reported that developing a business plan was critical for the success of on-farm dairy processing ventures. When faced with changing markets, new opportunities, or shifts in business ownership, the business plan provides a foundation for key decision-making. With marketplace volatility, increasing environmental regulations, and uncertain futures, having a well thought out business plan can provide stability.
Each business plan is somewhat unique to the individual dairy farm, but there are several common elements included in most business plans. The first and most important is the executive summary. This is often written last, after the rest of the plan is completed and provides key details in a snapshot format. Business history, current operational information, and a marketing plan along with details about production and finances round out the sections of the business. Projections, both on the production side as well as the financial side, are important in looking ahead and planning for the future. These projects provide business owners with targets and a way to monitor success in accomplishing the plan over time. There are a few templates and guides (2, 3, 4, 5) to make it easier to craft a sound business plan.
Part of business plan development is internal, and those critical conversations among owners and managers are just as beneficial as the final document that is put on paper. External advice and assistance can also be helpful. Having trusted advisors assist with creating the business plan can also help to ensure that your competitive advantages and strategies are highlighted and that your data used is accurate. In Pennsylvania, a number of resources are available through Penn State Extension and the Center for Dairy Excellence. A recorded webinar highlighting steps and benefits to business planning can be found at Business Planning: Spring Roundtable Recording.
When building a barn or when building a business, take time to develop a good plan. Business plans provide the roadmap to follow during uncertain times as well as to help ensure competitiveness in productivity and profitability.
Source: Penn State Extension