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Business Planning -- Overview

Business Planning --

Overview*

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Business planning is an ongoing process that does not have a clear starting or stopping point. The materials on this web site are assembled in an order that is thought to best explain the process. A suggested starting point is to inventory the business (step 1), followed by assessing oneself (step 2), specifying expectations about the business' operating environment (step 3) and setting personal and business goals (step 4).

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The next step [testing the current farm (step 5)] is an opportunity to analyze the current business by using the description developed in step 1 and the long-term expectations specified in step 3. Part of the test is to answer questions, like those suggested below, to determine whether to proceed with the planning process (by following the outer circle) or to consider an alternative (by following the inner circle).

  • Would your current business, with no changes, be satisfactory 5 years from now?
  • Would the business be profitable?
  • Would the business generate the cash flow that you need or want?
  • Would your equity be changing as you desire?
  • Would the business fulfill your personal and business goals (step 4)?
  • Would the business allow you to pursue activities that you are skilled and interested in (step 2)?
  • Would the business require an acceptable level of risk exposure?

If the answers to all these questions are yes, you are ready to proceed toward implementing the plan (the outer circle). If the answer to any one of these questions is no, you should consider "taking a spin around the inner circle" to identify and test alternatives.

Step 6 (identifying and testing alternatives) and step 7 (identifying and testing transitional plans) are drawn on the inner circle to indicate that they may need to be repeated several times each planning cycle. Each time you reach the point where the inner circle touches the outer circle, the questions listed above need to be answered for the alternative. When all the answers are yes, you are ready to continue towards implementing the plan on the outer circle.

Some alternatives may require that you return to several other steps from the outer circle before proceeding to develop an alternative to be tested on the inner circle. For example, you may want to revisit the operating environment to learn more about or reconsider the factors that would impact the viability of an alternative farming enterprise. The inner circle also is an opportunity to consider and assess non-farm alternatives.

Once you are ready to implement the strategic plan that will hopefully move you from where you are to where you want to be, you can continue on the outer circle by considering constraints (step 8), procedures for monitoring and controlling the business (step 9), and the processes of documenting, sharing, and revising your long-term plan (step 10).

Proceed to Business Inventory

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* Prepared by David M. Saxowsky, Dr. Cole R. Gustafson, Dr. Laurence M. Crane, and Joe C. Samson, agricultural economists, Department of Agricultural Economics, North Dakota State University. August 1995.

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