Building Your Farm Plan

First Financial Bank
Buying or building any business requires much evaluation and planning, but when that business is a farm, there are more layers of complexity. You need more than a business plan – you need a farm plan.

Any entrepreneur will tell you that owning your own business can be all consuming, but when it is a farm, it is built into its DNA. Farms are often owned and operated by families, sometimes across multiple generations. They live on or adjacent to the farm, and it sets the pace of their living because the crops and stock are both their investment and living things that require their attention on a particular set of schedules for them to survive – and thrive. Creating a “whole farm plan” can help you all be on the same page while documenting decisions and details that will keep you moving forward together.

What do we mean by a “Farm Plan”?

At the core of a Farm Plan is a solid business plan, including your goals, legal structure, financial information, and what you are planning to do to “plant the seeds” for success:

  • What are you going to produce?
  • How are you going to market what you are producing?
  • To augment your resources and skills, which other business entities are you working with as partners, suppliers and/or investors?
  • What do you hope to accomplish in the near future – and longer term – in quantifiable details?

These are not only tied to your business goals and values. These are also driven by you and your family’s personal beliefs. Because at the heart of your farm business plan are the people most important to you: your family, whether they have an active or passive role in the “business” of your farm. You’ll need to document and plan for those close family members who will also have active operational and/or investment roles in your farm business. This is where a “farm business plan” greatly differs from other types of business plans. Your family members are intrinsically involved in the story of your business. As you look at acquiring a farm (or the land to start one), you will need to identify their roles and responsibilities in the farm business. Changes to the family or their schedules not only affect your family’s life but may impact the work of your entire business. Accounting for this in your plans is essential.

What else do you need to include in your plan?

Because of the risks out of your control but inherent to farming, from weather extremes, disease, regulations, and supplies whose costs are driven by a commodity market – and your production impacted potentially at every turn – it’s important to hope for the best but plan for the worst. Work with your trusted advisors to put together the following:

  • A risk management plan that can help alleviate some of the impact and/or provide a backup plan for handling the uncontrollable; and,
  • An investment plan that helps you leverage the good times, survive the bad, and have your family be relatively comfortable during the in-between.

What other plans should you make?

Looking down that (hopefully) long life and road ahead as a farmer, you will want to have plans in place for the transitions of your life and business that address the following:

  • What happens when you and/or another key person retires (or passes away)?
  • Who will succeed you?
  • How will you transition operational and business leadership?

It is important to have retirement, succession, transition, and estate plans in place long before you may ever need them.

Who needs to be involved in this process?

Your family is at the top of the list. Any adults or soon-to-be adults in the family should be in the loop on your plans. Depending on how you plan to structure your farm business legally, those individuals may need to be actively involved in building those plans and assessed for creditworthiness by your financial lender. Regardless of the level of involvement, having the entire family understand the potential and collaborate toward a mutual goal is helpful.

One of the most influential advisors to your process can be a lender who understands not only the financial landscape but also the business of the family farm. You want to work with those who can help you navigate the opportunities and challenges in the various farm loan programs because they are preferred vendors for sources such as the Small Business Administration (SBA), Farmer Mac, and Farm Service Agency (FSA) loans. This insight and experience can help you navigate the process. Your documented plans can help you achieve your goals.

The lenders here at FFB have stood in work boots like yours. They are not only financially savvy about these loans – they are also farmers or ranchers. Want to discuss your plans?

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