How to draft a business plan – Part 2

A farmer’s production plan, describing the farm’s resource potential, the type of enterprise, planned production output, and the existing output is an important part of a business plan.

It’s important to have a business plan when you apply for a loan. As Phatisa’s agribusiness expert Duncan Pringle says, a business plan must include information on the loan’s purpose, applicant/s details, the business location, the production plan, marketing plan, management plan, financial plan, and a risk assessment.

READ: To make a profit, first make a plan

This week we look at the production plan, which should show the farm’s resource potential with production areas, the enterprise type, planned production output, and, if available, the current level of output.

Firstly, you must determine your resource base. What natural resources will your business depend upon?

You’ll need to show that you have considered the soil, climate, vegetation, water resources and terrain. For example, if the terrain is too steep for crops, instead plant a tree crop, or use the land for grazing. Climatic limitations will also dictate what crops you can grow.

If you wish to go into poultry, the resource base would be the buildings as physical assets and not the natural resource base. Provide details about buildings and infrastructure. Consider if there is water, road access and electricity. For example, how will you provide electricity if your production system needs power?

You must also share your production expectations, known as an input/output analysis. Inputs include how much fertiliser and seed you need to buy and outputs are the expected yields. If you’re producing maize, show if you’ll be using conventional mechanised production or a minimum tillage system.

If you’re beef farming, show the number of livestock units the veld and pastures can carry and what production system you’ll use. Will you be producing weaners or oxen? What will your level of productivity be for calving percentage and cattle weight gain? That will determine how much product you must sell.

The production plan should also include clear details on the capital expenditure you’ll need for, say, on irrigation equipment or a shed.

Source: Duncan Pringle, head of Phatisa Agri Business South Africa. Call 031 765 2442, e-mail [email protected], or visit www.phatisa.com.