THE FARM BUSINESS PLAN

1
What is a Farm Business Plan?

 A document that records the most

important decisions and actions
affecting the operation of the farm
business.

 A way that make sure that all the

things that need to be done, and in a
way that makes the farm more
profitable. 2
Components of a Farm Business Plan

Situation
Analysis
Farm Vision
Action Plan Goals and
Objectives

Managemen
t (incl. Risk Market Plan
Mgt.)

Financial Production
Plan Plan

3
Components of a Farm Business Plan

Situation
Analysis
Farm Vision
Action Plan Goals and
Objectives

Managemen
t (incl. Risk Market Plan
Mgt.)

Financial Production
Plan Plan

4
Components of Farm Business Plan
1. Background: It is the description of farm business
including the vision, goal and objectives. It guides
farmers stay focused on what he or she wants to
achieve. Includes the following:

• Location

• Vision

• Mission (Optional)

• Goals

• Objectives

• Strategies 5
Components of Farm Business Plan

1. Background

Location
- salient features of the commodity/enterprise

- farm area

- description of location and vicinity (Agro-

climatic and accessibility)
- farm plan
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Components of Farm Business Plan

1. Background

Vision – BE, DO HAVE

• WHAT YOU WANT TO BE

• WHAT YOU WANT TO DO
• WHAT YOU WANT TO HAVE

• CREATION PRECEDES ACTION

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 Components of Farm Business Plan
1. Background

Mission - PRINCIPAL COMMITMENTS

 
• Purpose – Why does the organization exist? What has
the organization obligated itself to accomplish within the
limits of its available resources?

• Product/Service – What is provided by the combined

efforts of the organization? State the general categories of
products or services provided.

• Customer/Client – For whom is your output provided?

State the internal or external customers or clients to
whom you provide your products or services? 8
Components of Farm Business Plan
1. Background
Mission - PRINCIPAL COMMITMENTS
 
• Scope (Geographical) – In what geographic or
organizational areas will you fulfill your purpose? The
areas you identify should be limited to those in which
resources will actually be allocated in order to provide the
output. If you provide your product or services to internal
users, specify organizational of other constraints which
may be appropriate.

• Employee/Officers/Members – What needs of

employees, officers, & members will you fulfill in pursuing
the primary commitments of your organization?
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Components of Farm Business Plan

1. Background

Mission - PRINCIPAL COMMITMENTS

 
• Social – What needs of the society will you fulfill
in accomplishing your primary commitment?
State only those obligations to which you will
actually commit resources.

• Stakeholders/Investors – What needs of the

stakeholders/investors must be satisfied as you
pursue your primary commitment?
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 Components of Farm Business Plan

1. Background

 Goals - results based on work analysis

(produce, market & generate sales/profit)

 Objectives – results based on needs analysis

 Strategies - defines the critical courses of

action to be taken to achieve objectives

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2. Farm Production Plan

Draw your Farm Layout and Vicinity Map

(north orientation)

Indicate Agro-climatic Features

of Your Farm (Soil, topography,
slope, water/rainfall pattern,
temperature, Wind Direction,
etc)

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2. Farm Production Plan
 State what commodity/ies you will grow and
number of hectares and/or square meters you will
plant/utilize for each enterprise.

Indicate Agro-climatic requirement of Your Commodity

(Soil, elevation, slope, water/rainfall req’t., temperature,
etc)

Enterprise Farmland Expected Yield Total Yield

Size (ton or kg or bag ( ton or kg
(hectare or or heads per or bag or
sq.m.) hectare or unit) heads)

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2. Farm Production Plan

Determine the 5Ms

• Material

• Machineries, equipment, facilities,

implements and tools

• Manpower

• Methods and Processes

• Money
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3. Market Plan

• It specifies the enterprise, the target

market and the buyer
3. Market Plan - It specifies the enterprise, the target
market and the buyer
• Focuses on the 7 Ps of marketing mix

 Product
 Price
 Place
 Promotion
 Process
 People
 Politics
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3. Market Plan

The Element of Market Plan

 A product exist only if
someone is willing to pay for it
(buys it)

 A product can be sold only if it

has a customer.

 Therefore marketing is critical

to the success of the farm
business
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3. Market Plan

What PRODUCT is required by the market?

• Size

• Texture

• Specific features and qualities

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3. Market Plan

At what PRICE can the product be sold?

• Farm Gate or Delivered

• Wholesale or Retail
• Discounts
• Premium price

• Pricing Methods:

 Price-Less Pricing

 Cost Plus Pricing 18

3. Market Plan

Where is the PLACE that the product can be

sold?

• Specific Market Outlets that will buy/need the

products
• Volume required by the identified market
outlets
• Price and Payment Terms
• Packaging
• Other conditions (Contracts & Agreements) 19
3. Market Plan

What methods can be used to PROMOTE the

product?

• Personalized
• Agents
• Broadcast (radio, TV)
• Publication (social media, flyers, billboards,
magazine, etc)
• “word of mouth”

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3. Market Plan

What PROCESS can be used to market the

products?

• Farm Gate or Delivered

• If delivered, medium of transport and logistics

• Wholesale or Retail

• Packaging

• What are the costs to take the product to market21

3. Market Plan

What are the standards for the PEOPLE needed

to market the products?

• Qualification standards

• Criteria and Methods of Placement

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3. Market Plan

What are the POLITICS I have to deal with to

market the products?

• Regulatory Requirements

• Business Permit

• Clearances

• Taxes

• Other lego-political requirements 23

 3. Market Plan

Enterprise Target Buyer Expected Farm Delivered Marketing

Market volume gate Market Cost
to sell price Price

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3. Market Plan

 Visit potential market

 Find out about different forms of transport

 Look at different forms of packaging

 Link out with specific buyers

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The common risk management strategies
• Choosing low risk activities
• Diversifying enterprises
Production-led
• Selecting and diversifying
Responses
production practices
• Maintaining flexibility

• Obtaining marketing information

• Participating in government
Marketing-led programs
responses • Spreading sales
• Forward contracting
• Minimum price contract

• insurance
• maintaining liquidity reserves
Financial responses • Working off-farm
• Pacing investments
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• Limiting credits
 RISK MANAGEMENT

Risks Mitigate Risks

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4. Financial Plan

It details the profit contribution from each

enterprise, and deducts fixed costs to arrive
at whole farm profit.

Focuses on:

 Cash Flows

 Farm Budget

 Income or Profitability
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4. Financial Plan

Questions to be answered as inputs to

financial plan.
1.What commodity to sell?

2.What quantity of each commodity to sell?

3.What are the costs involved in each product?

4.What are the price per unit that are expected to

get from each product?

5.How much is the profit per unit of product sold?29

Role Play
Argument between Juan and his wife Marsha
Give me money to
buy a dress for my I have no money.
cousin’s wedding.

We spent the money on

What? We just sold 20 bags bills. Some, we invested in
of onions! What happened? the poultry business.
How did it get finished?

You are lying! You must have

spent the money What? Don’t call me a
elsewhere! liar!
4. Financial Plan
Budget
Step-1: Enterprise _______________________________
Step-2: For the period: ___________ to ______________
Step-3: Area under cultivation (has): ________________
Step-4: Income
Item Quantity (ton or kg) Unit Price (PhP Value (PhP)

Step-5: Total Income

Step-6: Variable Costs
Item Quantity Unit Price (PhP) Value(PhP)

Step-7: Total Variable Costs

Step-8: Gross Profit (income – variable costs) 31
 4. Financial Plan
C ash Flow
Activity Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Total

Inflow
Sales

Cash
Available
Outflow
Seed
Fertilizer
Pesticide
Hired
labor
Cash
Needed
Net Cash
Flow
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4. Financial Plan
Cash Availability
Do I have enough cash available to implement the farm enterprise?

( ) Yes, I have enough cash ( ) No, I don’t have enough cash

• I have the following cash available to use for my enterprise:

__________________

• I need the following amount of cash for my enterprise:

______________________

• The amount of extra cash I need is: __________________________

• I need the extra cash in the following months:

______________________________

• I can get this money from the following sources:

____________________________
4. Financial Plan
Cash Availability/Sources of Funds
Sources Amount
4. Financial Plan
Income Statement
Step-1: Enterprise _______________________________
Step-2: For the period: ___________ to ______________
Step-3: Area under cultivation (has): ________________
Step-4: Income
Item Quantity Unit Price Value

Step-5: Total Income

Step-6: Variable Costs
Item Quantity Unit Price Value

Step-7: Total Variable Costs

Step-8: Gross Profit (income – variable costs) 35
 4. Financial Plan
Variable Costs
ITEM QUANTITY UNIT PRICE/kg VALUE (PhP)

Income
Corn
Variable Costs

Seed
Fertilizer
Fertilizer (2)
Irrigation fees
Labor charges
Harvesting
Total Variable
Cost

Gross Profit

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4. Financial Plan
Fixed Cost
• Depreciation Cost
ITEM Purchase Date of Economic Depreciation Total Cost for
Price/Unit Purchase Life Cost the enterprise

Loan Terms:
• Interest Expense
Year Principal Interest Total Principal • Interest Rate
Balance
• Bank Charges

• Repayment Period

• Grace Period
• Other Fixed Costs 37
• Other Conditions
5. Risk Management

• Risk is defined as the probable

occurrence of an event, which can
be calculated with some accuracy.

• It can be determined by identifying

all the possible outcomes of a
given situation.

• However, it is impossible to predict

what will really happen. This
unknown factor is risk.
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5. Risk Management
Risk factors in farming:

1. Agriculture depends on biological processes and is

subject to fluctuations in production as a result of
weather change and infestation.

2. Enterprises, such as vegetables are subject to sudden

changes in price.

3. Long term enterprises, such as tree crops require

investment for a long period and may be subject to
price changes that can make them uneconomic.

4. Certain crops may thrive under conditions prevalent in

some parts of the country but prove uneconomic in
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others.
5. Risk Management

The most common sources of risks are:

production and technical risk

marketing or price risk

financial risk

institutional risk

human or personal risk

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 Disaster Risk Analysis Form
Disaster Risk Analysis Form
Community Profile: This information is obtained during the community entry and social mapping
Hazard Profile: Here the hazard is described based on the hazard assessment findings.

Element at Individual survivability capacity gaps Community Capacity Gaps Degree of Risk
risk
Element at At the highly At the At the low Readiness Prevention Mitigation High Medium Low
risk vulnerable medium vulnerable Capacity capacity capacity
vulnerable gaps gaps gaps
Human
elements
example
Farmer
(example)
Women
Non
human
elements
List of
productive
assets
List of
critical
facilities
Summary findings: The risk level for different categories of people, their numbers and whether the levels of risk are acceptable. If
risk for any group is not acceptable then measure should be taken to relocate them. If risk levels are acceptable the community can
agree on recommendations for risk reduction.
Recommendation: Identify priority elements at risk and the risk reduction measures including the appropriate organizations. This
information is based on the capacity gaps already identified.
What are the measures to address the hazard? These are prevention or mitigation measures?
What are the measures for addressing for addressing vulnerability? These are for individual survivability and community readiness?
Which organizations are appropriate for implementing the CMDRR plan? What monitoring, evaluation and learning measures should
be taken?
The common risk management strategies
• Choosing low risk activities
• Diversifying enterprises
Production-led
• Selecting and diversifying
Responses
production practices
• Maintaining flexibility

• Obtaining marketing information

• Participating in government
Marketing-led programs
responses • Spreading sales
• Forward contracting
• Minimum price contract

• insurance
• maintaining liquidity reserves
Financial responses • Working off-farm
• Pacing investments
42
• Limiting credits
 RISK MANAGEMENT

Risks Mitigate Risks

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 Farm Business Plan Outline
Enterprise: __________ Date: _______

1. Background of your enterprise: _______________________

2. Name of Farmer Entrepreneur: _________________________
3. Address: _____________________
4. Period of the Plan: _______________________

VISION:

GOAL:

OBJECTIVES :

STRATEGIES :

MARKET PLAN

FARM PRODUCTION PLAN

FINANCIAL PLAN

MANAGEMENT PLAN (i.e. risks, how to smoothly apply all the learned lessons of this seminar
need kin management, all stated activities in the action shall be done according to
calendar of operations)
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RISK ASSESSMENT AND MANAGEMENT PLAN
 ACTION PLAN
1. Physical resources and inputs

 Arrange financing for buying inputs

 Confirm suppliers and the costs of each input item

 Arrange transport to collect/deliver input ahead of time for its use

 Place orders/collect inputs from suppliers

2. Labor

 Identify skilled labor from nearby areas

 Check other farmers source of labor

 Identify technologies that could bring down the cost of labor

 Train labor so that they could work more efficiently

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 ACTION PLAN
1. Market

 Conduct market survey

 Identify commodities most wanted by the market

 Identify commodities that match with the features/adaptable to farm

 Make a list/directory of buyers, their preferences, prices, delivery and

payment terms and other marketing conditions

 Identify marketing needs and costs

2. Risks

 Identify possible risks, vulnerabilities and capacities

 Identify measures to enhance readiness, prevention and mitigation

 Identify technologies and costs needed to address the risks

 Identify sources of assistance and support and initiate interventions46

 ACTION PLAN
ACTION DURATION START DATE RESPONSIBILITY

Physical Resources

Production /labor

Market

Risks

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 WORKSHOP

Operational Plan
Goals/ Programs/ Timeframe/ Location/ Responsible Needs and Budgetary Remarks
Specific Projects/ Schedule Venue Person/s/ Requirements Requirements
Objectives Activities Unit/s
End of Lesson

Thank you for your attention.

Enjoy the workshop!

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 WORKSHOP OUTPUTS:
1. Market Situation & Analysis : 7 Ps
2. Production Situation & Analysis
• Agro-climatic Condition of the Farm
• Rainfall Patterns
• Soil Texture
• Topography/Elevation
• Terrain/Slope
• Wind Direction and Velocity
• Temperature and Humidity
• Pests, etc
• 5 Ms
3. VISION, GOALS, OBJECTIVES
4. Market Plan (7 Ps with Marketing
Plan Matrix))
5. Farm Plan (Location, Vicinity, Area
per enterprise, water source,
power, buildings, drainage
system, roads, etc)
6. Production Plan (cultural
management with 5 Ms in each
activity & with Production Plan
Matrix)
7. Financial Plan (Budget, Cash Flow,
Variable Costs, Fixed Costs
Profitability, Crop Summary, etc)
8. Operational & Action Plan