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Building a Business Plan

Why do I need a formal business plan?

Operating any business without a plan is like building a house without blueprints. A good business plan provides you with a profile of where you want your business to be in one year, three years, five years or maybe even longer. It also helps you make a map of what you need to do to get to where you want to be.

A well-constructed business plan provides your business with short and long-term objectives. Without objectives, it will be difficult for you to focus your resources and energy and to measure progress.

What should be included in a business plan?

A good business plan features a short-term component and a long-term component.

  • A short-term component includes a cash flow statement (budget) that shows when and how your business generates and consumes cash. It can also include production goals and interim financial objectives.
  • The long-term component outlines your long-term business objectives and plans.

What benefits does the short-term component provide?

The short-term component of the business plan is a useful planning tool for the current year. The cash flow budget can identify borrowing needs and estimate profitability. In addition, the short-term component might address marketing plans, outside labor needs, and other important factors related to the current operating cycle.

Examples of short-term components:

Objectives Example
Financial objectives Decrease total debt by $20,000
Production goals Ship 19,000 pounds of milk per cow
Expense goals Reduce overall expenses by 2%

What does long-term component provide?

The long-term component articulates your long-term objectives by detailing specific targets you expect to reach in future periods. It can also include a general discussion of what you will need to do to meet those targets. Your long-term component can identify a wide range of objectives.

Examples of general long-term objectives:

Objectives Example
Financial goals Establish desired levels of working capital and overall debt that will allow you to withstand adversity
Production targets Identify realistic production levels necessary to meet your income projections
Capital acquisitions Outline desired expansion plans and set conditions under which the expansion would be feasible
Management Itemize other targets and other actions necessary to achieve goals

Specific objectives:

  • Identify long-term debt levels per operating unit
  • Determine liquidity levels that will help meet unexpected adversity
  • Set conditions under which expansion is feasible
  • Itemize targets for expense management

How do I get started?

You local Western AgCredit loan officer can review your business plan or serve as a sounding board for your ideas.

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