Business Planning and Marketing WorkshopBusiness Planning & Budgeting Business Planning and...
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Business Planning & Budgeting Business Planning and Marketing Workshop May 3, 2010 Luis A. Ribera Assistant Professor & Extension Economist
Transcript of Business Planning and Marketing WorkshopBusiness Planning & Budgeting Business Planning and...
Business Planning & Budgeting
Business Planning and Marketing Workshop
May 3, 2010
Luis A. Ribera
Assistant Professor & Extension Economist
Outline
• Why Plan?
• Business Planning for Ag. Producers
• What to produce?
• Crop Budgets
– Conventional vs. Organic
– Sensitivity Analysis
• Worksheet
Why Plan?
• Compass to guide your business
• Generates $ for us
• Show alternatives
• Account all costs associated with business
• Competition
• Economic downturn
Why Plan?
• Jim Collins’ Book: Good to Great
• Great companies outperformed other companies by an average of 700%
• Two main reasons:
– Vision
– Leadership
• “Plans are nothing, but planning is everything” Dwight Eisenhower
Business Plans for Ag. Producers
• Useful guide to the future of the business
• Tool for acquiring capital
• Two purposes:
– To help make decisions to meet specified objectives and goals
– To help sell the feasibility of the business to bankers and other potential investors
Business Plans for Ag. Producers
• Components of a Business Plan
– Business description
– Mission statement
– Objective and Goals
– Production Plan
– Financial Plan
– Market Plan
– Legal and Liability issues
Business Plans for Ag. Producers
• Financial Plan
– Primary purpose is to show whether or not the business is feasible
– Typically includes 3 years of projected financial statements
– Should include
• Amount of money borrowed, length and interest rates
• Financial risks and strategies to overcome risks
• Tied closely with production plan figures
Business Plans for Ag. Producers
• “Those who see the invisible can do the impossible” Carl Mays
• For other publications on Risk Management Education visit
• http://agecoext.tamu.edu/resources/library/risk-management-curriculum-guide.html
Where’s the market?
• Farmers Market
– Downtown Austin 2010
• 30 producers
• 113,533 customers
• $1,633,841 million in Direct Sales
• $508,370 in Indirect Effect
• $598,366 in Induced Effect
• $2,740,577 in Total Effect
Where’s the market?
• Consumer Supported Agriculture (CSA)
– Producer in the valley less than 2 acres
– Now, 35 members on a 24-week supply of food basket
• Gross Sales of $15,000 from CSA
• Gross Sales of $14,000 from 3 FMs and 5 restaurants
– Could supply well over 100 customers
• Potential gross sales $41,000 from CSA
What to Produce?
• All related to demand and cost of production
• Tracking cost and revenue streams are key to remain in business
• To see sample budgets visit:
http://agecoext.tamu.edu/budgets
Budgets
Watermelons Conventional Organic Difference
VC $2,439.60 $6,871.47 -$4,431.87
FC $636.97 $620.81 $16.16
TC $3,076.57 $7,492.28 -$4,415.71
Cucumbers
VC $4,464.23 $7,085.06 -$2,620.83
FC $695.51 $701.64 -$6.13
TC $5,159.74 $7,786.70 -$2,626.96
Tomatoes
VC $11,507.43 $13,150.04 -$1,642.61
FC $783.84 $762.42 $21.42
TC $12,291.27 $13,912.46 -$1,621.19
Sensitivity Analysis
• Example: Watermelons
– Breakeven Price
Conventional Organic
Yield (cwt) 200 200
COP $3,077 $7,492
Breakeven Price $15.38 $37.46
Sensitivity Analysis
• Example: Watermelons
– Price: $20 for conventional; How much for
organic?
Conventional Organic
Yield (cwt) 200 200
Price $20 $42
COP $3,077 $7,492
Profit $923 $923
Sensitivity Analysis
• Example: Watermelons
– 30% reduction on yield for organic
Conventional Organic
Yield (cwt) 200 140
Price $20 $60
COP $3,077 $7,492
Profit $923 $923
Units Price Quantity Total
Income
0.00
0.00
0.00
Total Income 0.00
Costs
Seed
0.00
0.00
0.00
0.00
Fertilizer
0.00
0.00
Herbicide
0.00
0.00
0.00
Insecticide
0.00
0.00
0.00
Water
0.00
0.00
0.00
Labor
0.00
Amortization Total Investment Years
0.00
0.00
0.00
Total Costs 0.00
Net Income 0.00
Cost of Production
Units Price Quantity Total
Income
0.00
0.00
0.00
Total Income 0.00
Costs
Seed
0.00
0.00
0.00
0.00
Fertilizer
0.00
0.00
Herbicide
0.00
0.00
0.00
Insecticide
0.00
0.00
0.00
Water
0.00
0.00
0.00
Labor
0.00
Cost of Production
Amortization Total Investment Years
0.00
0.00
0.00
Total Costs 0.00
Net Income 0.00
What’s coming up?
• Economic impact of Farmers Markets
• Economic feasibility of small acreage production
• Cost of production for selected organic vegetables in South Texas
• Presentations and other materials
http://texaslocalproduce.tamu.edu
Questions?
http://texaslocalproduce.tamu.edu
Luis A. Ribera
Phone: 956-968-5581
E-mail: [email protected]
