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Three Business Planning Tips to Start the New Year Right

Alicia Morris, Director of Farm Credit University Training, AgFirst Farm Credit Bank
 
As the New Year draws closer, it is a perfect time to start planning for what is to come. For many agricultural businesses, harvest has passed and winter provides some time to spend indoors working on plans for the next growing season. Here are three areas to think about as you make your business plans for next year:
  • Conduct Variance Analysis – The end of the year is a great time to look back over the past growing season to determine what went well, as well as what needs to change in the coming year.  Hopefully, you have kept good records in 2018 that can be used to evaluate the level of success achieved this year, and make next year even better.  Compare your 2018 budget to actual results to determine where changes need to be made.  An Ag Biz Planner graduate recently remarked, “Numbers don’t lie. If something isn’t working, don’t be afraid to change it.” Were variances in the outcomes due to macroeconomic factors in the economy or markets that are out of your control? Were the variations due to internal management factors that can be controlled? Identifying these key areas can help to establish realistic projections for the year ahead.
     
  • Set Goals – What does success mean to you? When determining goals for the upcoming year, think about what a successful year would look like for your business and personal life, and structure your goals to get you there. As one Ag Biz Planner graduate put it, “What are you really working for?” Establish “yard markers” similar to those on a football field, that will move you closer to your goals and help you see incremental progress along the way. Always write down your goals and post them in a place where you see them often to keep you focused throughout the year. If you work with your spouse or on a team, it is helpful for everyone to be involved in the goal setting process, so there is accountability and alignment in the team.  You would be surprised what can be accomplished when a team has shared goals!
     
  • Develop Cash Flow Projections – A monthly cash flow projection that outlines cash inflows and outflows is helpful in planning for the next year. Map out the timing of major (and minor) expenses and income. When thinking about cash flow, other factors such as marketing, human resource management, and purchasing come into play also. The cash flow projection can be a great way to think through the whole cycle of your business to determine if or when an operating line of credit may need to be used, and the amount of additional liquidity needed at different times of the year. Think this through before meeting with your lender to discuss financing needs in the coming year. Always remember to build in an extra cash cushion to allow for unplanned expenses or to take advantage of unexpected opportunities that arise.
Next, put your plan into action! The best laid plans do not help unless they are executed and monitored. Once your business plan for the year is completed, commit to using the plan throughout the year. Pull out the plan at each business meeting, at least quarterly, to determine if changes need to be made, and to monitor progress toward goals for the year. Think of a business plan as a “living” document that chronicles progress in your business throughout the year. Tweak your goals, adjust projections, and implement new action steps to make the business successful given market volatility or changes in management strategy.
 
 
Monday, December 03, 2018
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