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6 reasons why you need a farm business plan

2.5 min read

A written business plan is an important tool for business success. Think of it as a roadmap—you can travel without one, but you’re much more likely to get lost along the way.

The process of developing a business plan can be overwhelming. Is it worth it?

While FCC advisors and other experts recommend that farmers develop business plans, the process can be overwhelming. And sometimes, it’s challenging to see the value. Is it a worthwhile investment?

Whether starting a new farm business or managing an established operation, the answer is the same: business plans are a worthwhile investment.

Here are six reasons why writing a business plan is crucial for your farm business:

1. Provides clarity and direction

A business plan helps you set strategic and financial goals and objectives that ultimately guide decisions and operations.

“It helps create focus, and focus improves business performance over time,” explains FCC business advisor Joel Bokenfohr.

Using your plan to check in and monitor your progress regularly also helps keep you accountable to your long-term mission and vision.

2. Gets everyone on the same page

FCC senior relationship manager Nathan Janzen believes improved communication is a key benefit of business planning. Sharing your business plan with team members can answer their questions and help everyone better understand the business.

For example, a written plan's ownership and management section clarifies roles and responsibilities, which could help manage expectations and improve relationships with farm staff.

3. Improves risk and financial management

Developing a business plan involves identifying and evaluating risks, analyzing your financial position and calculating projections. These exercises help you build a solid understanding of your farm business, which enables you to make more informed decisions as opportunities and challenges arise.

“Doing the math often helps people remove emotion and make logical decisions,” Bokenfohr points out.

4. Helps secure financing and attracts investors

A business plan proves the viability of a farm business and demonstrates your business management skills to financial institutions and potential partners.

Whether it is a formal requirement of your credit application or not, there is great value in presenting a plan when you’re seeking financing or investment.

“It speaks volumes about management,” Janzen says.

5. Boosts confidence and peace of mind

In a national study by Farm Management Canada, 88% of farmers indicated that following a business plan helps them cope with stress and contributes to peace of mind.

A solid understanding of the farm business's potential and the knowledge that a comprehensive roadmap is written down also build confidence.

6. Supports smooth transitions

In Bokenfohr’s experience, having a business plan is extremely beneficial for transition planning.

“It’s a tool that improves how families communicate and make decisions,” he says, adding that numerous business plan components complement transition conversations.

Ready to get started?

Various resources can help you start or update a farm business plan. While Janzen and Bokenfohr encourage farmers to develop and write their plans hands-on, farm advisors can also assist.

Download FCC’s free business plan bundle to access a guide, template and sample plan.

Article by: Rebecca Hannam