How Do I Draw Up A Proper Business Plan?

mikefoxo

If I were to go to a bank in search of a loan to buy land (unlikely I know:() what exactly would I need to bring with me and what exactly is a business plan? Is there a template out there I could copy? And how can you really rely on it if you're trying to forecast prices into the future?

freedominacup

mikefoxo wrote: »

If I were to go to a bank in search of a loan to buy land (unlikely I know:() what exactly would I need to bring with me and what exactly is a business plan? Is there a template out there I could copy? And how can you really rely on it if you're trying to forecast prices into the future?

What enterprise?

Milked out

The two main things the bank will look for as far as I am aware are security and repayment capacity. With most decisions being made in Dublin a lot of the time they may look at your previous 3 years performance as much as any projections you will be giving in. It may be no harm to get your ag advisor/ accountant to do a plan with you before going to your bank manager.

hammer73

Why try and second guess what the bank wants, go and make an appointment with the bank and ask them outright. I am looking for X anount of money for a certain enterprise. What do you need off me to make sure that i secure the loan.

Could save alot of time doing unnecessary paperwork.

delaval

mikefoxo wrote: »

If I were to go to a bank in search of a loan to buy land (unlikely I know:() what exactly would I need to bring with me and what exactly is a business plan? Is there a template out there I could copy? And how can you really rely on it if you're trying to forecast prices into the future?

By golly that's a question.
I have done hundreds at this stage and at the end of them all it always comes back to the one thing, trying to increase profitable output per ha. I have given up on them as they are so aspirational. What I do now is plan each project wheather thats land or a parlour or simply keeping more heifers.

When people talk of a business plan it usually reads better than it is.

My tips for dealing with the bank and I deal almost exclusivly with their money, I try to use myown as little as possible.

You will need 3 years audited ac
Profit monitor even though it has no bearing on their decision it's just to demonstrate that you are switched on.
They need repayment capacity and security.
A common mistake and I have made this in the past is not borrowing enough. People worry about interest but accept this as the fee for the use of the money for a fixed period.

If you don't borrow enough you may need to raid cashflow to complete a project and while at the time you feel it's there it inevitably comes back to bite you in the ass about 6 mths later. Now you are in a bind and need to go to the bank looking for working capital (overdraft) which is really expensive credit if you can get it.

If you have a project I would suggest you get to know your business inside out. Meet with your local manager and ask what they need. Your next meeting should be with the ag person from the bank.

This meeting should take place in your office/kitchen where you can demonstrate your farming ability with a walk around and you are in a comfortable environment. If you get a question and you need to consult your records you have it to hand. I have a top class farming neighbour who never borrowed much from the bank and decided to build a new shed and upgrade his yard. He was declined, I suggested asking the ag person out and I'd say the decision was taken on the drive way before they knocked on the door. They told him that they didn't realise he was running such a good show. He wasn't able to get that point across.

Up to 08 we could meet directly with the decision makers in the bank when looking for money. Since then with new regulations there has to be a layer between the borrower and decider. These are your manager and the ag person so if they are going to bat for you they need to know every pertinant detail.

They will want to know the extent of your reserves be that shares or cash held elsewhere. Be as cagey as you can here as they will want to secure as much against the loan as possible. You need to keep your reserves as they may be required. I had to draw on personal reserves to clear up the mess after 09 and had I committed them to the bank origianally I was on **** street.

Remember they are a money shop nothing more or less. A feed rep or any one else all they need to know is 'can this guy pay me?'
This is what you need to demonstrate

I'm sure I've left loads out but others will fill in the blanks I'm sure

lakill Farm

Audited accounts wount be needed, but the last 3 years accounts and maybe notice of assessments from revenue.

A future 60month cashflow statement in detail per month and also a 15 year summary cashflow statement (5 yrs detailed 10 years summary)

A SWOT is always good. Your strengths, Weakness, Opportunity (Its the reason your looking for a facility) and threats (Don't say none or its not realistic)

Keep the waffle or filler to a level, don't over do it. Keep it clear, with loads of info and detail and some colour charts. Its like keeping a 3year old entertained and put it in a nice presentation pack, bound with covers. Stand out from the crowd.

delaval wrote: »

By golly that's a question.
I have done hundreds at this stage and at the end of them all it always comes back to the one thing, trying to increase profitable output per ha. I have given up on them as they are so aspirational. What I do now is plan each project wheather thats land or a parlour or simply keeping more heifers.

When people talk of a business plan it usually reads better than it is.

My tips for dealing with the bank and I deal almost exclusivly with their money, I try to use myown as little as possible.

You will need 3 years audited ac
Profit monitor even though it has no bearing on their decision it's just to demonstrate that you are switched on.
They need repayment capacity and security.
A common mistake and I have made this in the past is not borrowing enough. People worry about interest but accept this as the fee for the use of the money for a fixed period.

If you don't borrow enough you may need to raid cashflow to complete a project and while at the time you feel it's there it inevitably comes back to bite you in the ass about 6 mths later. Now you are in a bind and need to go to the bank looking for working capital (overdraft) which is really expensive credit if you can get it.

If you have a project I would suggest you get to know your business inside out. Meet with your local manager and ask what they need. Your next meeting should be with the ag person from the bank.

This meeting should take place in your office/kitchen where you can demonstrate your farming ability with a walk around and you are in a comfortable environment. If you get a question and you need to consult your records you have it to hand. I have a top class farming neighbour who never borrowed much from the bank and decided to build a new shed and upgrade his yard. He was declined, I suggested asking the ag person out and I'd say the decision was taken on the drive way before they knocked on the door. They told him that they didn't realise he was running such a good show. He wasn't able to get that point across.

Up to 08 we could meet directly with the decision makers in the bank when looking for money. Since then with new regulations there has to be a layer between the borrower and decider. These are your manager and the ag person so if they are going to bat for you they need to know every pertinant detail.

They will want to know the extent of your reserves be that shares or cash held elsewhere. Be as cagey as you can here as they will want to secure as much against the loan as possible. You need to keep your reserves as they may be required. I had to draw on personal reserves to clear up the mess after 09 and had I committed them to the bank origianally I was on **** street.

Remember they are a money shop nothing more or less. A feed rep or any one else all they need to know is 'can this guy pay me?'
This is what you need to demonstrate

I'm sure I've left loads out but others will fill in the blanks I'm sure

td5man

lakill Farm wrote: »

Audited accounts wount be needed, but the last 3 years accounts and maybe notice of assessments from revenue.

A future 60month cashflow statement in detail per month and also a 15 year summary cashflow statement (5 yrs detailed 10 years summary)

A SWOT is always good. Your strengths, Weakness, Opportunity (Its the reason your looking for a facility) and threats (Don't say none or its not realistic)

Keep the waffle or filler to a level, don't over do it. Keep it clear, with loads of info and detail and some colour charts. Its like keeping a 3year old entertained and put it in a nice presentation pack, bound with covers. Stand out from the crowd.

Would an accountants assistant be able to put such a package together?

Timmaay

Glanbia have a financial planner on the ICBF website for dairyfarmers, (obv not much use if your not in dairy). Anyways its easy enough to play around with and will give you an idea of what figures etc are required for one. As to how useful a dairy financial plan is, not very in my opinion 2bh, the price of milk has an astronomical impact on your figures, and its the one variable moving forward that any predictions on are just a stab in the dark. Even look at how much the goalposts have moved since say 2009, when 20c/l was often considered breakeven, costs are well up since then, so any 5yr plan drawn up back then can largely be thrown out the window by now.

lakill Farm

td5man wrote: »

Would an accountants assistant be able to put such a package together?

Ah ye. Most will do the financial elements. All clients different is what I find. Sometimes a client would ask for just a copy of the Notice of assessments and accounts and they do all the work, other times a client would want it all done.

"doctors differ and patients die" as the saying goes

delaval

Timmaay wrote: »

Glanbia have a financial planner on the ICBF website for dairyfarmers, (obv not much use if your not in dairy). Anyways its easy enough to play around with and will give you an idea of what figures etc are required for one. As to how useful a dairy financial plan is, not very in my opinion 2bh, the price of milk has an astronomical impact on your figures, and its the one variable moving forward that any predictions on are just a stab in the dark. Even look at how much the goalposts have moved since say 2009, when 20c/l was often considered breakeven, costs are well up since then, so any 5yr plan drawn up back then can largely be thrown out the window by now.

Banks are using 28 to stress loans and 30 if high solids. Glanbia statements tell a lot. I always include 12 in any large application

mikefoxo

I was thinking of going for a calf to beef system. I'm 23 and hoping to make a career of farming. My father owns 40 acres but isn't farming it intensively. That's it in a nutshell.

jersey101

mikefoxo wrote: »

I was thinking of going for a calf to beef system. I'm 23 and hoping to make a career of farming. My father owns 40 acres but isn't farming it intensively. That's it in a nutshell.

if you were able to get your hands on a bit more land heifer rearing could be a good option also. Could be more demand for it in a few years if lads what to only have cows on milking block

Timmaay

jersey101 wrote: »

if you were able to get your hands on a bit more land heifer rearing could be a good option also. Could be more demand for it in a few years if lads what to only have cows on milking block

Slightly off topic here, but anyways moving forward I'll probably be milk the 120 or so on the current milking platform (assuming no other land shows up), contract rearing would suit a lazy sod like myself down to the ground :P. Assuming I've a 25% replacement rate, so 30 incalf and 30 maiden heifers to be contract reared every year, would that be a big enough number of animals for some the likes of mike here on his 40 odd acres to have and made a reasonable enough return on the effort (probably part time, but that should be fine). Or would it only work with a large volume of heifers, which is where I usually hear of it being done, with likes of 200+ herds of cows.

jersey101

I dont see why not. i havent a clue what the charge is of rearing heifers per day but id say there could be more money in it compared to a calf to beef to system.

mikefoxo

Would ye as dairy farmers see it as a more viable long term business? What with post 2015, lots of fellas expanding and more people looking at it as an alternative. Would that sort of system be linked to the fortunes of the dairy business? I was looking at calf to beef because I hear there is better returns in it than suckling (plus no hassle with cows). I know a part of that was down to good beef prices in the last while but it seems to consistently outperform sucklers.