Finance 101: Farm and Food Business Financial Essentials

Overview:

There are four main reasons to create and maintain a budget, and each plays a significant role in a food producer’s ability to make sound financial decisions. Here, Mr. Schryver explains how creating and tracking a budget can help you make sound financial decisions that can yield profits.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Tom Schryver, Executive Director, Center for Regional Economic Advancement, Cornell University.]

You’ve probably heard people talk about budgets and budgeting before. You’ve got to have a budget. Where’s your budget? Show me your budget. Can I see your budget? Why do we doit, though? Let’s start there with the fundamental question of what is it for.

So there’s really four main reasons why you budget. Fundamentally, one of the key ones is understanding what resources you need for your business, and when you need them. But there’s three other main reasons that really make a difference and help drive why we budget.

One is knowing ahead of time what really matters in your business model, making sure you understand what drives performance, what expenses really matter, what revenues really change things so that you don’t wind up falling into the trap of what we might call pennywise and pound foolish decisions, focusing on things that don’t matter and maybe not spending enough time with the things that really impact your performance.

Another reason we budget is so that you have something to compare your actual performance to. Once you go through a period, you say, OK, we thought x was going to happen, y actually happened. What were the differences? What can we learn from that?

How can we understand what’s changing in our business versus our expectations so that we can plan more effectively for the future? Perhaps most importantly, why you budget is just making sure ahead of time that what you’re doing actually makes sense. Having a vision for the future that articulates some form of business that’s worth doing, something that might yield profits or achieve some other financial goal that you have. Having a budget that lays out what needs to happen for you to achieve those goals is a really important thing to make sure that you’re heading in the right direction.

So if that’s why we budget, then how do we think about budgeting? The way I recommend most people think about budgeting is on a cash basis, really focusing on how much cash you have, how much cash you bring in, how much cash you lay out and doing that period by period.

When I say period, what I mean is you can choose the period that you want. You could do it over a year, a quarter, a week. But I find most people wind up doing this over months. Why months? Because that’s when bank statements come out. That’s when credit card statements or utility bills.

There’s so many things that happen in a business that are done on a monthly basis. By budgeting by month, you can start to see a period of time that’s not too short, not too long, where you can start to really understand the differences. By doing it by month, it should show you then how much cash you expect to generate or use in each particular month. One of the reasons why that matters is many businesses don’t wind up with cash flows that are even over the course of a year.

Businesses that have different cash flows at different times are said to be impacted by what we call seasonality, when things change depending on the time of the year. One of the more obvious examples of that is in farming where you pay labor and cost of seed and fertilizer and so on to plant a crop and then you don’t receive the income from that crop until harvest, maybe in the autumn time after you harvest and sell that crop.

So you wind up with seasonality where you have a period of time in the spring where you’re laying out a lot of cash, and you don’t get paid back until later. Planning what that is really important to make sure that you have the right cash on hand to support your business, even if you’re going to be profitable.

Seasonality doesn’t just impact farming. You might have tourism businesses where there’s a tourist slow season and a high season that impacts demand or if you’re in food processing, maybe you have different availability of inputs, or maybe the prices of those inputs vary depending on the time of year as well.

Being able to plan on that so that you have the right resources in place and a buffer can be really important. So getting back to thinking about budgets, doing a monthly budget of money in and money out can help you understand the impacts of seasonality so that you might have a profitable year, but you might need to lay out a bunch of cash earlier in the year to support your business.

Understanding how much you need and when is critical so that you can make smart decisions in terms of ensuring that you have the right resources in hand to support your business safely. This is going to help you understand the risks that you’re taking so that you can assess for yourself how to mitigate and manage those risks or even if they’re worth it.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

The balance sheet is the central financial document for a business, showing the current financial position of the business at a particular moment in time. In this video, Mr. Schryver describes the three main sections of the balance sheet and how they work together to give you a sense of your business’s current financial position.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Tom Schryver, Executive Director, Center for Regional Economic Advancement, Cornell University.]

When managing a business and working with an accountant, you might see four major financial statements that give you a sense of how the business has been doing. Those financial statements are an income statement, sometimes it’s called a P&L or a profit and loss statement; a statement of cash flows, which talks about how much cash is going in or out of the business; a statement of owner’s equity, which shows who owns what of the business; and last but certainly not least, a balance sheet, which shows the status of the business at a particular point in time.

That difference between that point of time, a balance sheet and a statement of owner’s equity, as a particular moment, such as the end of a year, 12/31 of a particular year, for example, is important compared to an income statement or a statement of cash flows, which look at the performance of the business over a period of time. So an income statement or a statement of cash flows might be over a month or a quarter or a year or some other period of time. But a balance sheet and a statement of owner’s equity are at a particular moment and give the reader a sense of where that business is at that point in time.

So let’s dive into balance sheet in a little bit more detail because it’s a really important statement that tells you about that status of the business.

[The screen shows a presentation slide with the title, “What’s a Balance Sheet?” with three gray boxes that read, from left to right, Assets, Liabilities, and Equity.]

Balance sheet is made up of three main sections– assets, liabilities, and equity.

[Three additional text boxes appear. A red arrow points from Assets down to a box that says What you got. A red arrow points from Liabilities to a box that says What you owe. A red arrow points from Equity to a box that says What you own.]

Put colloquially, assets are what you got, liabilities are what you owe, and equity is what’s left over. It’s what you own. So at the end of the day, when you look at a balance sheet, those three things need to be in balance, as the word balance suggests.

[An equal sign appears between What you got and What you owe, and a plus sign appears between What you owe and What you own, to create the equation What you got = What you owe + What you own.]

What you’ve got needs to equal what you owe plus what you own. Assets needs to equal liabilities plus equity.

[The screen cuts back to Tom Schryver speaking to the camera.]

Let me illustrate this with a simple example. Imagine you have a house. It’s worth $300,000 and you owe $200,000 on a mortgage.

What do you got? You’ve got a house that’s worth $300,000. That’s the asset.
What do you owe? $200,000 on a mortgage. That’s the liability.

What do you own? You, therefore, have $100,000 in equity in that home. The asset worth$300,000 is equal to the liability of 200,000 plus the equity of 100,000. And so this is how and why a balance sheet balances. It shows the disposition of those assets.

So what does it matter? It breaks down your assets by type. It gives you a sense of what you actually have.

In that simple example I gave before, you only had one type of asset, but in a business, you might have many different types. You might have cash inventory on hand. Maybe you’ve got some property and equipment.

It also shows the types of liabilities you have. Maybe you’ve got some short-term borrowings, like some credit card payables. Maybe you’ve got other accounts payables to vendors or payables to employees.

You might have longer-term debt in terms of longer-term loans that you’ve taken out, or maybe you have a substantial amount of equity that you’ve built up in the business. This is really helpful for everyone to understand because it gives you a sense of the strength of the business at that particular moment in time. A key constituent that uses this a lot are banks who will use it as a key part of credit analysis to understand whether or not maybe you have a lot of assets and not a lot of liabilities. Or maybe you’ve got a lot of liabilities already for not a lot of assets because that’s really helpful for them to understand in terms of your creditworthiness.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

Understanding your business’s cash flow is critical to the success of your business. Here, Mr. Schryver discusses the three sections of a cash flow statement (sometimes referred to as a profit-and-loss statement or P&L statement) and how they inform business decisions, including the prices you charge for the goods you sell and the quantity you need to sell to break even.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Tom Schryver, Executive Director, Center for Regional Economic Advancement, Cornell University.]

A critical success factor for any business is managing cash. You’ve probably heard the phrase, and I agree with it, cash is king. Even if you’re ultimately profitable, if you don’t have enough cash along the way to do what you need to do, you’re not going to be successful. So understanding your cash flow is critical to be successful in business.

One of the ways we do that is by using a statement of cash flows or a cash basis income statement or some people might call it a profit and loss or P and L statement, and that’s going to help you track your cash. When you think about a P and L that tracks cash or a statement of cash flows, it’s really got three sections.

The first most important and the biggest one is what’s called operating cash. Operating cash starts with the cash that you bring in from sales revenue. So maybe you’re selling a product or you’re selling a service. Immediately underneath your sales revenue comes from costs, things like production costs, how much did it cost you to make those units? How much did it cost you for inventory and raw materials? Labor costs. How much did it cost you to deliver that service or actually produce those materials?

Underneath that are other expenses like insurance, rent, utilities. You might call these overhead expenses. Expenses that you must incur to be in business, but are not directly related to any particular unit that you sell. Underneath the operating section is the investing section. I don’t necessarily mean investing in stocks and bonds, but investing in longer term assets, maybe it’s real estate, maybe it’s new equipment, or things that you’ll be using over a longer period of time.

And then underneath the investing section is what’s called the financing section, cash flow that maybe comes in if you borrow money or you sell equity or cash flow that goes out in the form of debt repayment or perhaps dividends to your equity owners.

So when we think about what drives that statement of cash flows, the biggest driver is going to be in the cash flow from operations operating cost section. And when you think about that, I encourage you to think about two different types of costs.

[The screen cuts to a presentation slide with the title, “Fixed and Variable Costs.” There is a picture of a potted plant with coins as its soil on the right. On the left is a bullet list that says, Fixed costs are (largely) fixed regardless of volume, and Variable costs are (largely) proportional to your volume.]

One are fixed costs. As it sounds, they’re largely fixed regardless of how much you sell.

So if you’re renting a building, the rent on that building is a fixed cost. Or maybe, and we’ll go through an example in a moment, you’re going and ordering a bunch of supplies or a bunch of material that you’re going to sell and you’re pre-ordering it as a one single big run.

Variable costs, on the other hand, are largely proportional to how much you sell and go up and down depending on how much activity you do. Maybe you’ve got a machine that uses electricity and the more you run it, the more your energy costs are going to go up or maybe you’re shipping goods to customers and if you have an order, you pay a shipping cost and if you don’t have an order, you don’t pay that shipping costs. So variable costs only happen if you actually have a sale.

So when you think about fixed and variable costs, putting costs in those groups allow you to do what’s called a break-even analysis.

[The slide changes to show a line graph, where the Y-axis measures dollars ranging from 0 to 200,000. The X-axis measures Number of Units from 0 to 18,000. A red line with an arrow to the right tracks horizontally across the graph at the 100,000 dollar mark, representing Fixed Costs. A yellow line with an arrow to the right begins at the 100,000 dollar level for 0 units, and increases to 140,000 dollars for 18,000 units, representing Total Costs (Variable + Fixed). A blue line with an arrow begins at 0 dollars and 0 units, and travels diagonally to 200,000 dollars for 16,000 units, representing Revenue. A black dotted line signifies where the Revenue and Total Costs lines intersect, which is at 10,000 units and 120,000 dollars. This point is labeled the Break-even Point.]

This is a really important way of thinking about the world to make sure you understand as you’re outlaying money for large orders, whether or not it makes sense and what would have to happen for it to be profitable.

[The scene cuts back to Tom Schryver speaking to the camera.]

So let me walk through an example. Let’s imagine you’re making a product and you find a vendor who says, great, I’ll make 300 of these for you. It’s going to cost $50 each. So that means you pay me $15,000 and I’ll deliver to you 300 units of product that you can then sell. As you take orders you know it costs you $15 to pack and ship each one of them and you think you can sell them for $90, including your shipping costs.

So a logical question then is, how many units do you need to sell to break-even on this deal? And if you sell all the units, will you be profitable and by how much? So let’s walk through that analysis. Again, you’re paying $15,000 up front. Each time you sell a unit, you get to keep $75. Why 75? Because as we said, the sales price is 90 and you’ve got $15 of variable costs in the form of packing and shipping each unit.

So if you take that $15,000 of cash up front divided by the $75 of net revenue, you get 200units that you need to sell to make back that $15,000. If you sell all 300, then you’re going to make profit of $7,500 once it’s all said and done.

Does this make sense to you? Do you want to do this deal? Does it work for you? That’s up for you to decide. But by using break-even analysis, it’ll give you a sense of what has to happen in the future for a cash outflow today to make sense.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resource:

Use the provided formula when doing your own break-even analysis to determine your break-even point.

Break-even point = (Fixed costs)/(Total sales revenue – Cost to make product)

Overview:

Loans can be especially helpful when a business needs a large sum of money for a specific purpose. In this video, Ms. DeHonney explores how farmers and food producers — especially those from historically underinvested communities — can access loans and lenders to support their food business or organization.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Allison DeHonney, CEO/Executive Director, Buffalo Go Green.]

In this video, I want to explore how farmers and food producers, especially those from historically underinvested communities, can access loans to support their food business or organization. Before we dive in, let’s briefly differentiate between a loan and a grant. While both provide funding, a loan is money that needs to be repaid with interest, whereas a grant is a sum of money that does not need to be repaid, which can be a significant advantage for small-scale farmers or startups who may have limited resources to invest in their operations.

So why would someone seek a loan over a grant? As a food producer, you may choose to seek a loan when you need a larger sum of money for a specific purpose, such as expanding your operation, purchasing new equipment, or investing in infrastructure. The loan application process can vary depending on the type of lending institution but generally involves providing detailed financial information and demonstrating the ability to repay the loan.

Some of the more traditional and established entities that provide loans to farmers and other food producers located in the Northeast are the USDA’s Farm Service Agency or FSA, which makes direct and guaranteed farm ownership and operating loans to family-sized farmers and ranchers who cannot obtain commercial credit from a bank, a farm credit system, institution, or other lender. Another one is Farm Credit East, which is part of a larger farm credit system, a network of lending institutions and specialized service organizations. And finally, state departments of agriculture and commercial bank.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resources:

• U.S. Department of Agriculture Farm Loan Programs
• Farm Credit East

Overview:

Securing a loan can be a daunting task for many small farmers and food producers, especially for those who are members of historically underinvested communities. Follow along as Ms. DeHonney discusses some of the common challenges faced by small farmers and food producers, as well as some alternative organizations that provide loans to farmers and food producers that have been discriminated against by traditional lending services in the past.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Allison DeHonney, CEO/Executive Director, Buffalo Go Green.]

Some common challenges to qualifying for a loan for small farm and other food producers are lack of credit history. Small farmers and other food producers may lack a robust credit history. Without a proven track record of financial responsibility, lenders may be reluctant to extend credit.

Limited assets, small farmers often have limited assets to offer as collateral for loans. Seasonal income, agricultural income is often seasonal, making it difficult to demonstrate consistent cash flow throughout the year. Qualifying for loans from traditional sources has been particularly challenging for Black Indigenous people of color or BIPOC food producers and other underinvested communities engaged in the food system.

These communities have faced significant hurdles in the loan application process, including limited access to information, lack of representation in decision-making processes, and systemic barriers. The United States Department of Agriculture has implemented programs and initiatives aimed at addressing these disparities. The agency’s office of partnership and public engagement works to improve access to USDA programs for historically underinvested communities, including providing outreach and technical assistance to help these communities navigate the grant application process.

More recently, alternative organizations have formed to provide loans to farmers and food producers that have been discriminated against by traditional lending services. Organizations like Black Farmer Fund, Black Farmers United, New York State, Northeast Farmers of Color Land Trust are just a few organizations that have non-traditional processes aimed at providing education, support, and funding. These organizations choose to work in community with those that they support, rather than creating transactional and extractive agreements.

Regardless of the lending institution, when applying for a loan, be prepared to provide detailed information about your business or organization, including your business plan, financial statements, and projections. Demonstrating a strong understanding of your business or organization and its financial needs will increase your chances of securing the loan you need to grow and succeed. Building relationships with lenders who understand the unique needs of the agricultural sector, like a local bank and demonstrating strong business plans with realistic financial projections can also help increase the chances of securing a loan.

If this type of preparation seems out of reach, you can look to the small business administration, local incubators designed to help small businesses get started and grow, or local colleges and universities that are turning more towards hands on learning for their students. Professor-led student in-field learning can be extremely beneficial for small businesses and usually at no cost. Exploring all available options to secure the financing you need for your farm or food business can be time consuming. So time management and preparation are a must.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resources:

• Black Farmer Fund
• Black Farmers United — New York State
• Northeast Farmers of Color Land Trust

Overview:

Unlike loans, grants do not need to be repaid. In this video, Ms. DeHonney explores grants, which are a significant funding source for farmers and food producers in the Northeast.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Allison DeHonney, CEO/Executive Director, Buffalo Go Green.]

In this video, we’ll explore grants, which are a significant funding source for farmers and food producers in the Northeast. Unlike loans, grants do not need to be repaid, which can be a real advantage for food producers especially small scale farmers or startups who may have limited resources to invest in their operations.

Grants often have specific purposes or objectives such as promoting sustainable agriculture, supporting local food systems, or addressing food insecurity. Finding the right type of grant to meet your business or organization’s needs can take time due to the variety of funders and requirements.

Grant applications typically have specific eligibility criteria, limited funding amounts, and the application process can be rigorous requiring detailed proposals, budgets, and other supporting documentation. Regardless, grants can provide crucial financial support to help expand a particular part of your business or organization or develop new practices.

Grants for food producers are often available from government agencies not for profit organizations and private foundations. There are federal grants which are funded by the federal government and are typically larger in scale. They often have strict eligibility criteria and application processes. For more information on federal grants, you can visit the US Department of Agriculture’s website and find the grants and loans page under farming.

There are also state grants which are funded by state governments and can vary widely in terms of funding amounts and eligibility requirements. These grants can be more accessible to local farmers and food producers. For more information about state grants, please visit your State Department of Agriculture website.

For federal and state grants, there are a few preparation steps that you should be aware of before starting to apply for any grant funding. Obtaining an employer identification number or EIN, a unique identity identifier number or UEI. The UEI has replaced the duns number. And lastly, you will need to register in the sam.gov management system.

You should also explore private foundations and not for profit organizations for grant funding. Grants from these organizations often have specific focus areas and may require detailed proposals. For more information on private foundations and not for profit funders that support farmers and food producers in the Northeast, visit the foundation center, now known as Candid or GrantStation online, which provides a database of grant opportunities from various foundations.

Exploring grant opportunities is a worthwhile endeavor for your food business or organization. Take time to understand the requirements and ensure alignment with your business or organization’s long-term sustainability objectives. Building strong relationships with guarantors, customers, and other stakeholders can help ensure ongoing financial stability.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resources:

• USDA Grants and Loans
• Candid
• GrantStation

Overview:

In the previous video, Ms. DeHonney provided a high-level overview of grants. Here, Mr.Thurston goes into greater detail, explaining what an agricultural grant is, how it works, and what you might need when applying for funding.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

So now, you’re ready to apply for funding for your farm business, and this funding may be a grant.

[The screen cuts to a presentation slide with the title, “Grants for Agriculture.” Next to an icon of a dollar sign is the text, “Some small grants are for specific types of agricultural businesses, but for the most part, all grants are reimbursements.” Next to an icon of dollar bills is the text, “A reimbursable grant is one where you receive the funds only after you’ve incurred the costs for your business.”]

So when we talk about grants for agriculture, most of those grants are going to be reimbursable, meaning that you expend the funds and then the agency or grantor sends you money back. There may be some small grants out there that you can find, the $5,000 to $10,000 range, that are not going to require a reimbursement, and they’ll just send you a check. But you should expect every USDA grant, every state grant, most larger grants are going to be reimbursable.

[The scene cuts back to Myron Thurston speaking to the camera.]

So how that works is you apply for the grant. They let you know that you’ve been funded. Then they’re going to send you a letter that says, here’s all the terms that you have to keep all the numbers. You have to hit everything that you’re agreeing to. You don’t have to sign that letter, but once you do, then you can start expanding funds for the grant and for the project.

[The screen cuts to another presentation slide with the title, “Grants for Agriculture.” On the left is a photo of a female-presenting farmer on a tablet, silhouetted by the sun while standing in a crop field. On the right is the text, “The Business Plan for the farm or other agricultural business must be submitted with the application for most grants. A budget and realistic projection of grant deliverables are critical.”]

A business plan is almost always going to need to be submitted with a grant, especially if you are a new business or you are a growing business, or you’re going to try to do something new with this grant. You’re also going to have to have a budget and realistic projection of grant deliverables.

[The scene cuts back to Myron Thurston speaking to the camera.]

So what do I mean by that?

When you look at grant deliverables, those are going to be the things that you’re going to do with the money that is given to you. This could be anything from grow your number of employees to sell more units of your grandma’s famous salsa, but you’re going to have to show that this money had an impact. And the reason for that is, whether it’s government where it’s tax dollars or whether it’s a foundation where it’s donor money, they’re going to want to know that that money is well spent.

So let’s talk a little bit about grant writing basics.

[The screen cuts to a presentation slide with the title, “Grant Writing Basics.” A vertical flow chart shows five steps. At the top is, “Read: Read the request or call for proposals carefully.” An arrow points from Read down to, “Follow: Follow the instructions.” An arrow points from Follow down to, “Study: Study the evaluation criteria.” An arrow points from Study down to, “Start: Start early.” An arrow points from Start to, “Make: Make an outline.”]

So the first thing that you’re going to want to do is read the request for proposals. That’s, on USDA, almost always going to be right there on the same page that you’re learning about the grant from.

And you’re going to want to read that carefully because it’s going to give you a lot of important information, including the instructions. They’re almost always going to give you a checklist of things that you have to include in your grant. And if you don’t include that stuff, these agencies may not even read your grant, so you need to be very careful to follow the instructions.

You’re going to want to study the evaluation criteria. So as an example, there’s the value-added producer grant with the USDA. That grant, specifically, is to help someone with a value-added product better market their product and reach a larger audience. So when you think about how you’re going to write your grant, you want to make sure you’re meeting those evaluation criteria.

You’re also going to want to start early. Most USDA grants may say six to eight weeks in order to submit the grant, but it’s going to take you that long to prepare the grant, prepare all the financials, and make sure that you have a good project to submit. And then you’re going to want to make an outline of what you’re going to include in your grant.

[The screen cuts to a presentation slide with the title, “Preparation.” On the left is a photo of four small seedlings being placed on increasingly higher stacks of coins to signify growth. On the right are three bullets: Get a plan on paper, Collect or prepare financial statements, and Keep records.]

So now, you’re preparing for the grant. You’re going to get a plan on paper. At this point, don’t worry too much about it being wordsmith or having someone edit it. You’re really going to want to focus on just getting something down on paper.

You’re going to want to collect and prepare financial statements and keep records.

[The scene cuts back to Myron Thurston speaking to the camera.]

So let’s say, we go back to the example of you’re selling salsa and you’re going to ask for that value-added producer grant money. They’re going to want to know how many units you’re selling today and in what areas you’re selling them, and then how many units you’re going to sell after the end of the grant.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resources:

If you’d like a more in-depth explanation of federal grants, visit the Grants 101 page onGrants.gov to learn more. While there, check out the five links in the left sidebar: The Grant Lifecycle, Pre-Award Phase, Award Phase, Post Award Phase, and the Getting Started Checklist.

You may want to explore these other federal grant programs:

• The USDA Agricultural Marketing Service’s Value-Added Producer Grant is an annual grant provided by the USDA to value-added producers.
• The USDA also invests in conservation through the USDA Natural Resources Conservation Service. It offers grants that will cover costs for things like organic certification and hoop houses to help farmers extend their growing season.

Tool: Business Plan Template

In order to apply for any grant or loan, you will need a solid business plan. This business plan template can guide you through every step of creating a well-structured business plan. Use it to outline your goals, strategies, and financial projections. Remember that a well-structured business plan is key to securing funding, so be sure to fill out every portion thoroughly.

Overview:

Creating a detailed business plan is critical for your success, but it can be a daunting task. In this series of videos, Mr. Thurston provides an overview of each portion of the business plan along with some tips to help you tackle the process of developing it. We encourage you to have the template handy and ready to write down ideas as Mr. Thurston goes through each section.

Business Plan Overview:

A business plan is a roadmap for your business, whether it’s a new business or one that’s expanding. In this video, Mr. Thurston explains why it’s important and how to start drafting one.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

So now, I want to talk to you a little bit about what a business plan is and why it’s important and why you’re going to have to have one for your business, whether it’s a new business, or whether it’s a business that’s expanding. So let’s talk about what a business plan is.

[The screen cuts to a presentation slide with the title, “What Is a Business Plan?” On the left is a photo of a young Black woman standing in a garden, holding a clipboard and talking on the phone. On the right is the text, “A good business plan is your roadmap to start-up, profitability, and growth. Your business plan will be a living document you can change as your vision and circumstances shift.]

A good business plan is going to be your roadmap from where you start up to how you become profitable and grow.

But you have to understand that a business plan is a living document. So today, your business plan is going to be very different than five years from now. Not just the financial sections, but the whole business plan itself may change.

You may find that you run into a roadblock with your business, and you need to go a different direction. Or depending on what types of products you’re selling. Let’s say that you’re selling honey, and all of a sudden, beeswax candles become a big part of your business plan or of your business, you’re going to want to include that in your business plan. So think of it as a living document.

But it’s also going to be extremely important for you personally as you grow your business, but also as you reach out to other people. Do you have investors? They’re going to want to know what your business plan is.

Are you going to go to the USDA and ask for a loan or try to get a grant? You’re going to have to have your business plan with you.

[Scene cuts back to Myron Thurston speaking to the camera.]

What I tell people is it doesn’t really as much matter how long your business plan is, rather that you’ve got a business plan and that it’s something that you can refer to.

So whether that’s something handwritten that you do quick and grow from there, or whether you take the time and maybe get together with a small business development council to write a professional business plan from day one, that’s going to be completely up to you.

[The screen cuts to a presentation slide with the title, “Tell Your Story.” On the left is a photo of a group of farm workers gathered inside a large greenhouse, looking at a small handheld tablet. On the right are the words, “Short Summary” with three bullet points: Who you are, What your business is, and Any information relevant to running your business.]

The first part of a business plan that we want to talk about is how this is your chance to tell your story. So think about it to start with a short summary.

This is going to be who are you, what your business is, and what is some relevant information about running your business. Every business is different. You could be in many different industries. You could be selling things. You could be providing a service. What are the things that are important about your business maybe that make you unique or that have helped lead to your success?

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

The executive summary is generally the first part of your business plan that everyone sees, which is why it’s critical to do well, as Mr. Thurston explains.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

So now, we’ll talk a little bit about the executive summary.

[The screen cuts to a presentation slide with the title, “Executive Summary.” On the left is a photo of someone in a field on a sunny day. You can only see their arms and hands, which are holding a tablet horizontally, which shows graphs and figures. On the right are two bullet points: Generally, the first part of the business plan, and Summarizes the business plan.]

Generally, that’s going to be the first part of your business plan that everyone sees, and it is going to probably be the last part that you write. So when you go to write your business plan, it is going to summarize all the rest of the business plan as executive summary.

[Screen cuts back to Myron Thurston speaking to the camera.]

So you’re going to want to make sure that all of the information contained in your business plan is there. A lot of people may or may not read the whole business plan. The full business plan is really for you, but the executive summary and the financials, that’s what a loan officer might look at. You’ve got to remember that that loan officer may not know your business or may not know your industry, so you want to make sure that you’re giving all of the important points about your business and explaining it in this executive summary.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

A business description is a concise summary of how your operation operates, who the main people are, and how long it’s been in business.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

The next part of your business plan is going to be a business description.

[The screen cuts to a presentation slide with the title, “Business Description.” On the left is a photo of a group of people gathered around a garden map on a table. On the left are two bullet points: A brief summary of your agricultural business, and If your business is a farm, draw the layout of your farm, if it will help you visualize the property.]  

This is going to be a brief summary of your agricultural business, and it’s going to tell people about how your business operates, how long it’s been in business, who the main people are involved. And it’s also, if your business is a farm, this area can be a great time to draw the layout of your farm. This will help you visualize your property, how things move around the property, what type of outbuildings that you might have as part of your property. And this can be really helpful when people are learning more about your business.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

In this video, Mr. Thurston explains how and why your business plan needs to include what products you offer as well as the timeline on which you produce them.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

As we move through the business plan, now we’ll talk a little bit about the products that you offer and the timeframe in which you offer them.

[The screen cuts to a presentation slide with the title, “Products and Timeframe.” On the left is a photo of a farm worker dressed all in white, holding a tablet in a cornfield. The tablet shows an icon of corn, and there are icons for a drone, ph levels, temperature, people, and pests extending out from the tablet, showing the information gathered by the device.]  

So when we think about products, this could be maybe what you grow or what you value added produce, but it could also be things like agritourism efforts at your property. Why is the time frame important? In agriculture, it’s extremely important because we look at whether it’s a product that you grow, you may have a planting season and a growing season and then have a harvest season, or even if you have something agritourism related like a corn maze, maybe that corn maze is only open for one month of the year. You want to have those pieces of information in your business plan.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

Knowing how to market yourself is a critical part of a successful business; here, Mr. Thurston explores how to incorporate this into your business plan.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

Now we’re getting into the heart of your business plan, and we want to start thinking about how you’re going to market yourself. But before that, you do need to do some market observations.

[The screen cuts to a presentation slide with the title, “Market Observations: Customers.” On the left is a photo of a young Black man working at an outdoor Farmers Market. He is handing a box of produce to another market employee while a customer stands in line. On the right are two bullet points: Who is your customer, current and/or desired? and Can you identify demographic information, such as income, age, interests, geographic area, etc., about your customers?] 

One of those observations is going to be who your customers are.

Are you a current business, and do you have a current customer base? Who are they? And do you desire to sell to other people? Do you desire to grow your business? So who might be that other customer? Can you identify demographic information, such as their income or age or interests, maybe the geographic area of your customers?

[The screen cuts to a presentation slide with the title, “Market Observations: Competition.” On the left is a photo showing an overhead shot of six people walking toward the left. They each have a teal colored bar below them, except for the fourth person in line, who has a red colored bar, and walks higher in the photo than the others, demonstrating differentiation. On the right are two bullet points: Make a list of your competition, and Consider how much competition there is within the geographic area you are marketing within.] 

And then you want to think about who your competition is. Write them out and consider how much competition there is within your geographic area.

[The screen cuts back to Myron Thurston speaking to the camera.]

So I’ll use an example of a corn maze. Are you the only place in the county doing a corn maze or there are half a dozen within driving distance of you?

This is going to have a lot to do with how you market yourself and how much success you may have selling that product or service.

[The screen cuts to a presentation slide with the title, “Market Observations: Advantages.” On the left is a chart with Competitive Advantage at the center, and Differentiation, Focus, and Cost as spokes. On the right are two bullet points: What are the advantages of your agricultural business in the marketplace? and What is unique about your products?] 

Then you want to think about what your advantages are in the marketplace. Maybe you’re the lowest cost or maybe this is your product focus, or maybe you’re different from others.

What does that look like? So if you’re in that county with six corn mazes, why would somebody want to visit your corn maze? Are you the cheapest so they can bring their whole family or come more often? Do you have a larger corn maze than anyone else? Or do you have a specific design? Those are some ways that you may have an advantage in the marketplace.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

In this video, Mr. Thurston delves into the marketing plan portion of your business plan.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

Now that you’ve done your market observations, you’re going to want to think about the marketing plan itself. The first thing you’re going to want to identify is what your total budget is. How much can you spend on marketing?

[The screen cuts to a presentation slide with the title, “Marketing Plan.” On the left is a photo of a woman in a field, raising her hand as if to select an icon from a touchscreen of hexagonal icons. On the right is the word “Identify” with four bullet points: Total budget, Where your competition is spending money, Where your customer base is, and The best day and time of the year for your business to attract new consumers. At the bottom of the list are the words, “Allocating funding to strategies that have a higher potential impact.” ] 

Look at where your competition is spending their money. Totally fine to copy other people in order to reach their customer base.

Also, think about where your customer base is. This is going to have a huge impact on how you advertise. For example, Facebook can get really, really specific on advertising to a certain person and a certain county, but maybe that doesn’t make sense for your business.

And then we’re going to want to think about what the best day and time of the year is for your business to attract new customers. So let’s use the example of the corn maze. You’re certainly not going to advertise in April for a corn maze in October.

You’re going to want to allocate funding to strategies that are going to have the highest potential impact. So as you think about where your customers are and perhaps the demographics that you’re trying to reach, Facebook may be better for older adults, where Instagram might be better for younger people.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

As you work to perfect your business plan, you’ll cover topics such as operations and risk management. Follow along as Mr. Thurston offers some thoughts on how to address them.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

So now, you’re getting pretty far into your business plan, and you should be awfully proud of all the things that you’ve done up to this point. Now, we’re going to look at your operations plan.

[The screen cuts to a presentation slide with the title, “Operations Plan.” On the left is a photo of an apple orchard on a sunny day. On the right are two bullet points: Describe the history of your business operation, and List risk management – write from a management perspective.” ] 

So you’re going to describe the history of your business operation, or if you’re a new agribusiness, how you will operate. At this point, we’re also going to list risk management, and we’re going to write this from a management perspective. So if you grow apples in Upstate New York, a late freeze can have a huge impact on your harvest. So don’t think about what you would do from your workers’ perspective, but as a business owner, how are you going to manage that risk if you have a late frost.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

The financial plan is one of the last sections of your business plan, and completing it can be a daunting task. Mr. Thurston explains how to prepare the financial plan and what it should include.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

One of the last sections of your business plan that you’re going to do is the financial plan. And this can be a little daunting to a business owner, especially if you don’t have a lot of years of receipts available.

[The screen cuts to a presentation slide with the title, “Budget Planning.” On the left is a photo of someone with long hair using a calculator outside near some small plants. On the right are four bullet points: Receipts, Preharvest, Harvest, Postharvest.]

But what are your pre-harvest costs, your harvest costs and your post-harvest costs?

Most of the time, farming or any type of agribusiness is going to be cyclical, meaning a lot of your expenses are going to be in the spring, a lot of your revenues are going to be in the fall. This is how you plan for that throughout the year.

[The screen cuts to another presentation slide with the title, “Budget Planning.” On the left is a photo of three workers in a rooftop garden. On the right are two bullet points: Labor and land, and Summary of returns.]

In this section, you’re also going to want to put the labor force that you have, the land that you own and work in a summary of returns, which could include things like a cash flow summary.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

After you’ve created your product or service and established a solid business plan, you’ll hopefully start to see demand for that product or service increase, which means you’ll need to find ways to meet that demand. Here, Mr. Schryver explores the concept of expansion. As your business grows, you’ll need to consider fixed costs and capacity constraints, potentially hire employees, and navigate responsibilities like labor law compliance, payroll management, and mandatory insurance.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Tom Schryver, Executive Director, Center for Regional Economic Advancement, Cornell University.]

When entrepreneurs start new ventures, the first stage they get to is what we in academia like to call product market fit. The idea that you’re selling a product or a service that has now found demand from customers. Customers want what you are offering. And they’re willing to show up and buy it. And you’ve got marketing to attract them so that you can sell more.

That then, once you achieve that product market fit, leads often to questions of expansion. And what mostly happens is companies will expand up until they reach the point where they can no longer serve any more. So again, to use academic terminology, your demand starts to meet your ability to supply. You’re at capacity to supply into that demand.

That then leads to decisions that entrepreneurs need to make about how and when to expand their businesses. Usually, that capacity constraint comes around a couple of different areas. It might be around the capacity of a physical location. You simply can’t sell more or do more in a particular constrained location.

It might be a human resources constraint in terms of the personnel that you have on hand. Or it might be an equipment constraint. Typically, what happens is then these expansion opportunities mean an outlay of a fixed cost. So some form of cost, opening a new location, buying more equipment, and maybe hiring new people and taking on commitments in the form of future payroll.

So when you think about what those costs are, you need to think ahead about where the resources are going to come from to pay for it. Maybe if you’re lucky, you’re able to see ahead and start to set aside positive cash flow for some future fixed cost expense later. Or maybe you’re thinking about finding those resources from the outside, sourcing capital, perhaps, from somebody who might invest in equity in the company or maybe from borrowing from, for example, a bank loan.

The key thing is trying to see these expansion opportunities ahead of time, so that you can be ready for them when those opportunities exist. So some things to think about as you consider growth opportunities. One is that these usually increase your fixed costs. Again, increased rent or debt service payments on a particular piece of equipment.

So thinking about break even analysis becomes really important. If you have the ability to make more units, great. But you have to then sell more units to cover those fixed costs to make sure that you break even. Another thing to consider, though, is maybe you’re in a situation where your costs might go down per unit as you get bigger.

These are what economists call economies of scale. For example, it might be the case that as you buy more raw material, your costs go down. Going from a bag to a pallet to a truckload to a freight car load, your costs might go down.

Or maybe you’re using equipment or labor more efficiently that also drives down costs per unit. The other thing that would go into this break even analysis then is, what’s the market opportunity? How much might you need to sell more for this to work? And is the demand there?

How much demand have you actually generated that exceeds your ability to supply leads you to a good and thoughtful process to understand how big to expand so that you don’t go too far. And you don’t want to make the mistake of expanding past the point of the demand in that marketplace. As I mentioned, there are really a few different types of fixed costs that companies incur when they expand.

Could be buying more equipment. Could be expanding to new locations or to a larger location. Another big one is in hiring. I love it when I hear entrepreneurs hiring employees for their businesses, especially that magical moment when entrepreneurs go from being the only person in the business to now hiring people and having a team.

This is what entrepreneurship is really all about. And the economic impacts on a region and a society of having entrepreneurs, starting new ventures, and hiring people are just amazing. At the same time, it’s important to recognize that there are some complications here as well.

As you go from not having employees to having employees, you have to start thinking about things like mandatory unemployment insurance or workers compensation, making sure that you’re compliant with employee classification of hourly versus salaried and staying compliant with labor laws, filing payroll on a regular basis and the associated tax filings, as well as staying on top of mandatory training requirements.

Good news, there are plenty of people who can help with this. There are companies that do payroll services that help you stay on top of payroll and tax filing, as well as doing HR outsourcing to make sure that you can stay on top of these requirements. But it’s really important, as you expand, to make sure that you’re ready to take on these tasks and roles to ensure that you’re staying compliant with all applicable laws associated with hiring.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

As your business grows, you’ll need to keep track of your cash flow. Whether it’s tracking your expenses, preparing your business plan, or finding mentors to help with those tasks, there are resources available to assist you in every facet of running your business. In this video, Mr. Thurston offers suggestions on how to keep track of your money, as well as the organizations and tools available to support you.

Transcript:

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Myron Thurston, Food Supply Chain Marketing Specialist, Cornell Cooperative Extension, Oneida County.]

Now, I want to talk to you a little bit about how you can keep track of your money, who can help you do that, and what can help you do that. So first, let’s talk about what.

[The screen cuts to a presentation slide with the title, “What Can Help You?” that shows the logos for Intuit Quickbooks, FarmRaise, Iowa State University Extension and Outreach Agriculture and Natural Resources (with the tagline “Ag Decision Maker”), and AgPlan.]

There’s programs like Quickbooks that is specifically designed for all small business owners and has a small fee, but can help you with everything from budgeting to doing your books to cutting checks to doing your taxes at the end of the year.

But if you decide you want to go with something that’s a little bit more ag-based, there are programs like FarmRaise out there which will help you with your finances, but through the lens of agribusiness. There are a lot of great resources online that can teach you new ideas or help you with finances, such as the Iowa State University extension systems, AG Decision Maker. I particularly like their website because they will not only give you the spreadsheets to use, but they’ll also give you all the instructions on how to fill that information out.

And then we have resources such as Ag Plan by the University of Minnesota extension that can help you with writing your business plan from beginning to end. It’ll give you prompts and spit out at the other end a fully finished business plan.

[The screen cuts to a presentation slide with the title, “Who Can Help You?” that shows the logos for Score (with the tagline, “For the life of your business”), the U.S. Small Business Administration, Extension Foundation, America’s SBDC, and the U.S. Department of Commerce Economic Development Administration.]

Who are the people out there that can help you?

So let’s talk a little bit about the US Small Business Administration. Their goal is to help all small businesses, including yours, because you almost certainly qualify as a small business. The first of the resources that I often send farmers to when they’re getting their business plans ready and getting started is America’s small business development center.

They have local offices in every single state, in multiple cities in most states. And you can find a professional there that will help you with things like writing your business plan and budgeting. But if you need a little bit more help, a little bit more one-on-one attention, you can go to Score, which are volunteers that work as mentors for small business.

Most cases, they are a small business owner themselves or a retired small business owner that’s going to know what you’re dealing with as a business owner yourself. There’s also the idea of going to economic development agencies. I encourage you as well to think about your business as an economic development driver in your community.

And for that reason, you can go to an economic development agency, whether it be something local, statewide, or nationwide, to look for grants and loans and sometimes property or other tax relief.

[The screen cuts back to Myron Thurston speaking to the camera.]

And then I’ll talk a little bit about the extension system. In the previous slide, you heard about two extensions, Minnesota and Iowa state.

But every single state in the United States has an extension system. It is tied to the land-grant university in that state. For example, in New York, it’s Cornell University. And in Pennsylvania, it’s Penn State University.

Extension employs thousands of people, whose sole job is to help you be successful as an agribusiness. And there are all sorts of expertise that they can bring to the table. So I encourage you to find who your local extension office, where your local extension office is, who works there, and what expertise they have to help you with your business.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Overview:

For for-profit farms and other small food producers, it is essential to understand the tax obligations that apply to your business. Ms. DeHonney discusses how to consult with experts to stay on top of your taxes and set yourself up for success.

Transcript

[The Northeast USDA Regional Food Business Center’s logo sits in the lower right-hand corner on a white background. The slide swipes to the left, showing Allison DeHonney, CEO/Executive Director, Buffalo Go Green.]

If you own a for-profit farm or small food business, it is important that you understand your tax obligations. Tax obligations can vary depending on your business structure and location and whether you own the land on which you operate. Complying with the federal, state, and local tax requirements that apply to your business requires careful planning.

Consult the Northeast Regional Food Business Center directory for technical assistance providers that offer guidance and business support. They offer a wide range of services, including workshops, webinars, and one-on-one consultations to help farmers navigate various aspects of their business, including tax requirements. Additionally, networking with other farms and food producers in your area can be resourceful ways of understanding the tax requirements that apply to your business.

You may want to consider engaging an independent tax accountant or accounting firm that specializes in agricultural businesses to ensure compliance with both federal and state tax laws. The IRS website, while it can be confusing at times, does offer an array of information about the required forms for all types of businesses, and you can call them for assistance. It’s vital to stay on top of your taxes. Seek out the resources available to you, and don’t hesitate to ask for help when needed.

Budgeting for a good attorney, bookkeeper, and accountant will be money very well spent. These areas of business often go hand in hand. You need to build relationships of trust, as oftentimes good attorneys and accountants are able to assist in building your infrastructure and setting you up for success.

[The end screen with the Northeast USDA Regional Food Business Center’s logo slides in from the left.]

Key Resource:

• Tax Information for Businesses

If you are leading a nonprofit food or agriculture establishment, there are many organizations that can provide advice on taxes. These resources can help nonprofit leaders better navigate the complexities of tax compliance and ensure their organization remains in good standing.

• National Council of Nonprofits: This organization offers resources and guidance on various aspects of running a nonprofit, including tax compliance.
• Nonprofit Finance Fund: This organization provides financial advice and resources to nonprofit organizations, including guidance on managing taxes and financial planning.
• IRS Exempt Organizations (EO) Division: The IRS provides specific resources and guidance for nonprofits, including tax requirements, filings, and compliance.
• Local extension programs: Each state has a land-grant university with an extension program that supports farmers and local food producers. These programs often offer tax-related advice tailored to agricultural businesses.
• Certified public accountants (CPAs) specializing in nonprofits: Engaging with CPAs who specialize in nonprofits can ensure that tax filings are accurate and compliant with current regulations.