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How to Create a Farm Business Plan

By FCSAmerica Staff

Ag Finances

Published on Aug 02, 2024

Farm operations of all sizes can greatly benefit from having a business plan; after all, a well-structured farm business plan is an essential tool for managing, growing, and sustaining a successful farm operation. It helps you set clear goals, secure financing, and navigate the complexities of running a farm. Whether you’re just starting out or have been farming for decades, it’s never too late to implement a business plan for your farming operation. Keep reading to learn more about what a farm business plan is, why you need one and how to go about developing a business plan for your operation.

What is a farm business plan?

A farm business plan is a comprehensive document that outlines the strategy, goals, and financial projections for running a farm. It serves as a roadmap for managing the farm's operations and achieving long-term success.

Here’s a breakdown of what a farm business plan typically contains:

Executive Summary: An overview of the farm, including its mission statement, goals, and a summary of the business concept.
Management and Organization: Information about the farm’s management team, organizational structure, and any key roles and responsibilities.
Business Analysis: A SWOT analysis analyzing the strengths, weaknesses, opportunities and threats of your farming operation.
Market Analysis: An examination of the target market, including customer demographics, market needs, competition, and trends in the industry.
Risk Management Plan: Identification of potential short-term risks and challenges, and strategies for mitigating them. This might include financial risks, environmental factors, and market fluctuations.
Financial Plan: Detailed financial projections, including startup costs, operating expenses, revenue forecasts, cash flow analysis, and profit and loss statements. It also typically includes a break-even analysis.
Exhibits: Supporting documents and additional information, such as maps, permits, legal agreements, financial statements, etc.

Why do you need a farm business plan?

A farm business plan helps ensure that a farm operates smoothly, meets its goals, and can adapt to changes in the market or industry. Some of the benefits of having a comprehensive farm business plan in place include:

Transparency around goals and objectives – A farm business plan helps you define your goals, strategies, and the overall vision for your farm. This clarity guides decision-making and keeps you focused on achieving your objectives.
Financing opportunities – If you need funding, whether from banks, investors, or grants, a comprehensive business plan demonstrates your seriousness and preparedness, increasing your chances of securing financial support.
Partner and team alignment – If you have multiple stakeholders or plan to hire staff, a business plan ensures everyone is on the same page regarding the farm's objectives, roles, and responsibilities. It can help divide up responsibilities equitably and empowers the team to get work done.
Ongoing monitoring and evaluation – With set goals and financial projections, a business plan provides benchmarks to measure your farm’s performance and progress. It allows you to track achievements and adjust plans as needed.
Legal and compliance – A business plan can help in understanding and meeting legal and regulatory requirements, ensuring that your farm operates within legal frameworks.

Steps for developing your farm business plan

A well-crafted farm business plan is a valuable tool for both new and existing farmers, helping to ensure that their operations are well-organized, financially sound, and strategically aligned with their goals. It’s all too common for farmers and other ag producers to shy away from business plans as they are often seen as overly formal, but they don’t have to be!

The secret to putting together a business plan is not to overthink it. You are simply defining your purpose for operating your farm and putting your plans down on paper. Ask yourself basic questions like: Why are you farming? What do you want to accomplish?

If we could share two important tips for success when building your farm business plan, they would consist of being realistic and continually review and revise your business plan. Setting achievable goals and avoiding overly optimistic projections along with periodically revisiting and updating your business plan as your business evolves are the keys to success.

And remember, there is no required length when it comes to a farm business plan – it can be as short or long as it needs to be, depending on how big or complex the operation is and how many people are involved.

The first step in the farm business plan process is to summarize your operation – describe your farm’s background and history, the products or services you offer, and the market needs you address. Include basic details about your farm, like:

Business name
Names of owner(s)
The ownership structure of your farm – is it a sole proprietorship, partnership, corporation or another type of entity?
Location and size of your operation

This is also where you can share a brief history of your farm and provide an overview of what your farm does or will do like what kinds of crops, livestock or services you produce.

Both a mission statement and a vision statement are essential elements of strategic planning for any business. Together, they help define the farm’s identity, purpose, and direction, ensuring that daily activities are aligned with broader long-term goals.

A mission statement defines the farm’s purpose and core activities – what the farm does, who it serves and how it delivers value. It is focused on the present and is typically a brief statement consisting of 1-3 sentences.

Mission statement example: To provide fresh, sustainably grown vegetables to our local community while promoting eco-friendly farming practices and supporting local agriculture.

A vision statement provides a future-oriented perspective and describes what the farm hopes to achieve or become over time. It is more abstract and motivational compared to the mission statement, aiming to inspire and guide the direction of the farm.

Vision statement example: To be a leading example of sustainable farming, known for innovative practices and a commitment to fostering a healthier planet and community.

Both statements should complement each other with the mission guiding the current strategy and operations and the vision inspiring and shaping the long-term strategy and aspirations.

Setting goals is a crucial part of developing a successful farm business plan. Goals provide direction, motivation, and benchmarks for measuring progress. It’s important to ask yourself the question of “why” during the goal setting process and keep in mind how your goals support your vision. Here are some guidelines on setting effective goals for your farming operation:

I) Develop short-term goals and long-term goals.

You should set forth both short-term and long-term goals in your business plan. It’s important to note that your business plan can include some personal goals as well as professional goals. For example, one of your goals might be to take a vacation this year.

Short-Term Goals: Achievable within 12 months or less and are typically a subset of a larger long-term goal.
Long-Term Goals: Achievable over a period of 1 to 5 years or more. These goals should support your vision.

II) Set SMART goals

We urge our customers to set SMART goals, which stands for Specific, Measurable, Achievable, Relevant and Time-bound.

Specific: Clearly define what you want to accomplish.
Measurable: Determine how you will measure progress and success. Set clear criteria for tracking your goals.
Achievable: Ensure your goals are realistic and attainable given your resources and constraints.
Relevant: Align your goals with your farm’s overall mission and vision. They should address important aspects of your business.
Time-bound: Set a specific deadline for achieving your goals. This helps create urgency and focus.

An example of a vague goal might be "Increase sales." vs. a SMART goal would be "Increase direct-to-consumer sales by 20% in two years."

III) Communicate your goals.

Perhaps one of the most important steps in the goal setting process is sharing your goals. Sharing your goals with others not only ensures alignment amongst stakeholders and team members but it also increases accountability. As a matter of fact, research has shown that when you share your goal with someone else, you’re more likely to achieve it.

As part of the farm business planning process, you will need to conduct several analyses of your operation, the market and your competition.

SWOT Analysis

We recommend starting with a SWOT analysis to evaluate your farm business’s internal strengths and weaknesses, as well as external opportunities and threats.

Strengths: What are the internal advantages your farm has over competitors? Examples of strengths could include innovative practices or access to high-quality land.
Weaknesses: What are the areas where your farm may be lacking or facing challenges? Examples of weaknesses might be high operating costs or limited technology.
Opportunities: What are the external factors or trends that could benefit your farm. Examples of opportunities could be consumer trends favoring farm-to-table products or government incentives like tax breaks for implementing specific practices.
Threats: What are external challenges that could negatively impact your farm? Examples of threats might be economic factors, adverse weather conditions, regulatory changes or pests and diseases.

Performing a SWOT analysis will help you understand the internal and external factors that may impact your farming operating so you can leverage strengths, address weaknesses, seize opportunities and mitigate threats.

Competitive/Market Analysis

Next, you will need to detail your plan to market your products or services. You should perform a market analysis to demonstrate your understanding of your target market and competition. Who are the direct or indirect competitors in your industry and what is your plan to compete with them? Examine industry trends and provide an assessment of the current market as well as what you think the future of your industry looks like.

Financial Projections

Startup Costs: Detail initial investments required for land, equipment, seeds, livestock, etc.
Revenue Projections: Estimate income based on market research and expected yields.
Cash Flow Analysis: Create a cash flow statement projecting income and expenses over time.
Break-even Analysis: Calculate when your farm will become profitable.

Risk Management

Potential Risks: Identify risks such as weather events, market fluctuations, and disease.
Mitigation Strategies: Outline plans to mitigate these risks, such as insurance or diversification.

Once you’ve completed your farm business plan, seek feedback on it by consulting with industry experts, like your financial officer, or mentors to refine your plan. Some of the most successful farming and ranching operations rely on a team of experts like their lender, agronomist, feed salesman, spouse, etc. We recommend assembling a team of experts that you can lean on for advice on areas that are outside of your expertise.

How often should you update your farm business plan?

Updating your farm business plan regularly is crucial for staying aligned with your goals, adapting to changes, and ensuring ongoing success. We recommend conducting a routine review of your business plan at least once a year and making necessary updates to reflect changes to your operation, financial performance and the market. If there are major life events or big expenses that take place over the course of a year, such as a change in stakeholders or a significant investment like land, that is another ideal time to reevaluate your business plan. Lastly, if you are seeking financing whether it be through loans, grants or investors, updating your business plan to accurately reflect your current situation and future plans is best.

A well-developed farm business plan is a vital component of a successful farming operation. It provides a clear framework for achieving your goals, managing daily operations, and adapting to changes in the market. By carefully crafting and regularly updating your business plan, you can enhance your farm’s efficiency, attract funding, and navigate the challenges of the agricultural industry. Whether you’re just starting out or looking to refine or expand an existing operation, a solid farm business plan is key to achieving long-term success. To get started creating your farm business plan, download our free Farm Business Plan Template today.

Download Farm Business Plan Template

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