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Building a Sustainable Business


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David Redhage, Kerr Center
2013 Oklahoma Beginning Farmer & Rancher Program
Horticulture Track - May

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Building a Sustainable Business

  1. 1. Worksheet4.19Filling Workforce NeedsUse the space below to flesh out new position titles and task descriptions for each new enterprise or existing enterprise that isshort on labor. Next, if adding labor, describe the type of position that will be created—full-time or part-time, temporary orpermanent, seasonal or year-round—as well as the skills desired for each position. Lastly, describe your strategy for addressingworkforce gaps and acquiring and training labor. Workforce strategies may include: reassigning current labor; adding new labor(family, employees, volunteers, interns); hiring out work to custom operators or consultants; or developing work trade arrange-ments with neighbors or relatives.You might also consider reducing some of your labor needs through the use of additionalequipment and machinery or through new business arrangements.Position/Task(title)Type of Position(full time/part time,temporary/permanent)Skills/Experience Desired Acquisition StrategyTASK4CONTINUED208 BuilDiNg a SuStaiNaBle BuSiNeSS
  2. 2. Position/Task(Title)Type ofPositionPart/fulltimeTemp/permanentSkills/ExperienceDesiredAcquisitionStrategyHerdsman Full time Experience withrotationalgrazingCollege,rotationalgrazingschoolsOffer partownershipin theherd.FieldSupervisorFull Time SupervisoryexperienceKnowledge ofvegetableproductionConferences onCSA’s,Contactothergrowers,Advertisein tradepub.
  3. 3. WorksheetPosition/Task(title)4.19Filling Workforce NeedsType of Position(full time/part time,temporary/permanent)Skills/Experience Desired Acquisition StrategyCONTINUEDTASK41. Describe training that may be required for new positions or new members of the workforce:2. How will training be accomplished?BuilDiNg a SuStaiNaBle BuSiNeSS 209
  4. 4. Describe training needed for new positions ornew members of the workforce.Safety training for new employeesRotational grazing schoolsGap training for a new positions in a CSAOklahoma Food and Technology CenterHow will the training be accomplished?Contact Oklahoma Food and Tech. Center forGAPContact a local EMS or Vo-tech for Safety trainingAttend conf., look in trade pub., talk to extensionabout opportunities for grazing education
  5. 5. Worksheet4.20CompensationResearch and record standard wage, salary and benefits for each new job or position. If you plan to create more thanfour new positions, make copies of this Worksheet or use additional sheets of paper.Position/Job1Position/Job2Position/Job3Position/Job4Average industrywage/salary/fees($/hour):TASKTypical industry benefits:4Tax rate:210 BuilDiNg a SuStaiNaBle BuSiNeSS
  6. 6. Research and record standard wage, salary andbenefits for each new job or position.Position/Job1HerdsmanPosition/job2FieldSupervisorAvg.industrywage/salary($/hour)TypicalIndustryBenefitsVacationSick LeaveTax Rate IncometaxesFicaMedicare/MedicadeWorkersComp.
  7. 7. Worksheet4.21Human Resources Expense EstimatesUse the space below to estimate and record your human resources input expenses for all family members and hiredlabor. Make these estimates as realistic as possible—use your research about industry standards and tax rates as well asyour own compensation goals.Position/Job Position/Job Position/Job Position/Job1 2 3 4Job title/descriptionNameWages/salary/fees($/hour)Benefits(health care,retirement)TASK4TaxesInsurance (workerscompensation)OtherTotal laborexpensesTotal hoursworked(a)(b)Total labor expenses/hour(a) / (b)BuilDiNg a SuStaiNaBle BuSiNeSS 211
  8. 8. Worksheet4.22Management StrategyReturn to your skills assessment in Worksheet 2.7.Are you ready to manage the operation? If not, who will? As you answerthe following questions, try to be honest and realistic.Then, develop a strategy for whole farm business management.1. Are you willing and ready to manage the operation and hired labor? If so, what skills do you bring to themanagement position? Are you a good communicator?2. Will you share management responsibilities? If so, how will you divide tasks? Will you develop a writtenmanagement agreement? What skills do other management team members bring to the business?TASK43. Can the business function without you? Who will manage the operation when you are gone or ill? Who isyour back-up?4. How often will you check in with family and other members of your workforce?5. Our management strategy can be summarized as follows:212 BuilDiNg a SuStaiNaBle BuSiNeSS
  9. 9. Are you willing and ready to manage the operationand hired labor? If so, what skills do you bring tothe management position? Are you a goodcommunicator?I have management and supervisory experiencefrom xxx corp.Part of my former job was to present detailedreports to staff about ongoing projects.Will you share management responsibilities? If so,how will you divide tasks? Will you develop awritten management agreement? What skills doother management team members bring to thebusiness?I have a business partner with whom I will sharemanagement responsibilities. Tasks are dividedbased on areas of expertise. There will be awritten management plan outliningresponsibilities.Can the business function without you? Who willmanage the operation when you are gone or ill?Who is your back-up?At this time (startup) no, but my goal is to developtwo employees as quickly as possible to managethe business in my absence.How often will you check in with family and othermembers of your workforce?Once a week meeting with management anddepending on the season, every other week fornon-management personnelOur management strategy can be summarized asfollows
  10. 10. Worksheet4.23Human Resources Strategy SummaryComplete this Worksheet for each major enterprise. Compile your research (from Worksheets 4.18–4.22) for each year inyour transition period (if appropriate) and for the long run or expected market outlook. Begin with a description of workloadrequirements. Next, describe your labor and management strategy for meeting workload requirements. Use additional paper ifneeded. Next, record your human resources expenses for this enterprise.You will use this expense information when evaluat-ing the business’ projected financial performance. Finally, summarize your human resources strategies for this enterprise or thewhole farm. Be sure to include a SWOT (strengths, weaknesses, opportunities, threats) analysis for each strategy.This will bethe start of your human resources strategy section for the written business plan.Enterprise:Workload (hours/month)Labor and AcquisitionManagementExpensesRecruitmentWagesFeesTrainingEducationSalaryBenefitsTaxesInsuranceOtherBusiness Plan Input - Human Resources Strategy Summary:Long Run(Expected) Year 1Transition PeriodYear 2 Year 3TASK4BuilDiNg a SuStaiNaBle BuSiNeSS 213
  11. 11. EnterpriseLivestockCSALong RunExpectedYear 1 Year2 Year 3WorkloadHours/Month200hrs/month240hrsmonth220 hrsmonth210 hrsmonthLabor andAcquisitionHave acoregroup offull timeTrainedstaffHireneededWorkers andtrainHave twobackupmanagementemployees inplaceManagementSet uppreliminarystaffchartModify asneededExpenses Ask bankforextensionSecure3 yearoperatingloanMakepaymentsMakepaymentsSummaryHumanResourcesDevelop a team who mutually supporteach other and the business. Keep staffinformed in a timely manner of changes.Provide shares (meat share/CSA) inaddition to wages as benefit. Havingemployees use the product will helpmaintain good GAP practices.
  12. 12. Worksheet4.24Risk ManagementComplete this Worksheet for each enterprise or the whole farm as appropriate. Briefly rank your business’ exposure tomarket, production, environmental and personal risk.Talk over risk management ideas with members of your planning team, afinancial consultant, or an accountant. List tools that you might use to reduce future risk.Then, summarize your strategy formanaging and minimizing your business’ risk exposure.Enterprise:Production RiskExposure to production risk:Type of production risk:Tools to minimize production risk:_____Low _____Medium _____HighMarket RiskExposure to market risk:Type of market risk:TASK_____Low _____Medium _____High4Tools to minimize market risk:Financial RiskExposure to financial risk:Type of financial risk:Tools to minimize financial risk:_____Low _____Medium _____HighPersonal RiskExposure to personal risk:Type of personal risk:Tools to minimize personal risk:_____Low _____Medium _____HighOur risk management strategy can be summarized as follows:214 BuilDiNg a SuStaiNaBle BuSiNeSS
  13. 13. EnterpriseLivestock/CSAProductionRiskLow MediumXHighTypes ofprod. RiskTools tominimizeWeather, spray drift, conceptionratesDrip irrigate, Hedgerows+informneighbors, good nutrition programMarketRiskxStorage coolersBackup generatorsFinancialRiskXCash flow during the first three yearsMake sure to borrow enough tocover expenses and set up anoperating line of creditPersonalRiskxKnowledgeable about business andagri.Seek opportunities to learn eachyear. Budget for it.Our Risk Good budgeting, educatedworkforce, insurance, working
  14. 14. Worksheet4.25Business OrganizationUse the space below to record information about the organizational alternatives that you are considering for the business.Your state’s Small Business Association is an excellent place to begin your research. If you are planning a major reorganizationof the business, be sure to consult a lawyer regarding necessary documentation and tax ramifications. Be sure to noteadvantages and disadvantages of each alternative as it pertains to your current situation, business vision and personal goals.Organizational Alternative 1Ownership:Tax rates:Filing requirements:Advantages:Disadvantages:Organizational Alternative 2Ownership:Tax rates:Filing requirements:TASK4Advantages:Disadvantages:Organizational Alternative 3Ownership:Tax rates:Filing requirements:Advantages:Disadvantages:BuilDiNg a SuStaiNaBle BuSiNeSS 215
  15. 15. Organizational Alt. 1Sole proprietorshipOwnership FamilyTax Rates PersonnelFilingRequirementsQuarterly payroll taxesAdvantages Full ControlDisadvantagesFull liability, risk all assets personnel +business
  16. 16. Worksheet4.26Farmland AffordabilityUse this Worksheet to estimate what price you can afford to pay for farmland.Gross cash farm incomeCash expenses (excluding interest)Income taxesPrincipal payments on term debtDepreciation reserveSocial security taxesTASK=–––––____________________________________________________________________________________________________________________________________4Total cash family living investments& nonfarm capital purchasesNonfarm income–+____________________________________________Cash available for principal andinterest on added land debtDown payment on landMaximum financially feasibleland price=+____________________________________________=______________________This worksheet was adapted from Analyzing Land Investments, videotape, Gayle S. Willett, 1988.216 BuilDiNg a SuStaiNaBle BuSiNeSS
  17. 17. Worksheet4.27FinanceUse the space below to begin developing your financing strategy for any start-up, annual operating, and longer-term capitaland real estate needs associated with each major business strategy alternative (for marketing, operations, and humanresources). Begin by having each member of your planning team (if appropriate) evaluate the importance of the financing cri-teria described in Figure 82 (control, cost, risk, liquidity). Next list money that will be needed to finance start-up, operating,and long-term needs as well as one or more financing strategy for each. If any of your strategies include the use of externalfinancing, be sure to research and record interest rates and financing conditions in the space provided. Be sure to talk withyour local lender, accountant or Extension educator—they can help you locate and evaluate which finance strategy best fitsyour personal criteria and business needs.Strategy CriteriaRank the importance of each of the following finance strategy criteria:Control _____Low _____Medium _____HighCost _____Low _____Medium _____HighRisk _____Low _____Medium _____HighLiquidity _____Low _____Medium _____HighFinancing NeedsList money needed for each expense category.Then, briefly describe one or more financing strategies for each.Value Strategy One StrategyTwoOne-time start-up needs$________________ _____________________________ _____________________________Annual operating needs$________________ _____________________________ _____________________________Intermediate needs (5-7 years) $________________ _____________________________ _____________________________Long-term needs (7-10 years)$________________ _____________________________ _____________________________Real estate needs $________________ _____________________________ _____________________________Finance OptionsIf you plan to seek outside financing (including government cost-share payments), research interest rates and other financingconditions (such as easement terms) from up to three sources for each financial need.Need Source/Institution Interest Rate ConditionsStart-upTASK4OperatingIntermediateLong-termReal estateBuilDiNg a SuStaiNaBle BuSiNeSS 217
  18. 18. StrategyCriteriaLow Medium HighControl xCost xRisk xLiquidity xFinancingNeedsValue StrategyOneStrategytwoStart-upAnnualOperatingIntermediate (5-7yrs)Long Term(7-10yrs)FinanceOperationsSource InterestRateConditionsStart-upOperatingIntermediateLong-termReal Estate
  19. 19. Worksheet4.28Financial Strategy SummaryComplete this Worksheet for each enterprise or for the whole farm. Use information from Worksheets 4.24–4.26 to recordinformation about your strategies for risk management, organization and financing. If appropriate, describe how your strategieswill change throughout your transition period.Then, list available financial expense information. Last, summarize your financialstrategy for this enterprise and the whole farm. Be sure to include a SWOT (strengths, weaknesses, opportunities, threats)analysis in your strategy summary.Enterprise:Risk exposure andmanagementLong Run(Expected) Year 1Transition PeriodYear 2 Year 3Organization and taxesFinancing needs ($) andstrategyTASK4Financial ExpensesConsultantFiling feesSoftwareMembership fees/collateralInterest on operating loanInterest on intermediate debtInterest on long-term debtInsuranceOtherBusiness Plan Input–Financial Strategy Summary:218 BuilDiNg a SuStaiNaBle BuSiNeSS
  20. 20. Worksheet4.29Summarize a Whole Farm Strategic Plan of ActionAsk yourself if each of the marketing, operations, human resources, and finance strategy alternatives you’ve identified are com-patible as a system. If you are considering more than one functional strategy (such as two marketing strategies or two financestrategies), be sure to explore on paper how these different strategies will affect the business as a whole. How will they affectother functional areas of the business? Rule out those strategies that are not compatible with one another or your businessvision as a whole.Then, use the space below to name one or more system-wide business strategies for your whole farm anddescribe, in one to two paragraphs, how each strategy addresses your critical planning needs, vision, mission and goals.Whole Farm Strategy Alternative # 1:TASK4Whole Farm Strategy Alternative # 2:BuilDiNg a SuStaiNaBle BuSiNeSS 219