Agribusiness Management ZAB 101

Week 4 - Agribusiness Planning

So far in this Unit, we have discussed the particular challenges that the ‘agribusiness environment’ throws at us. All these challenges are really characterised by one thing: uncertainty. There’s uncertainty in many contexts and over different time-scales. There’s the vagaries of the weather, markets and biological processes and these can have short, medium and long-term impacts.

We have also discussed how the physical and geographic location of agribusinesses influences their character, in terms of what they can produce and how they sell their produce.

We also discussed the concept that it is through the act of management that we respond to these influencing factors; and it is how we respond that shapes our agribusinesses.

When people respond in a similar way to these influencing factors, we tend to get a fairly homogenous mix of agribusinesses. For example, we get clusters of similar business models, producing roughly similar products and selling into similar markets. For example, we see the concentration of wool producers in the ‘Western District’ of Victoria or the Midlands of Tasmania. We see the pasture-based dairy industry in North West Tasmania; or the intensive vegetable production on river flats in the North West; or the apple and pear orchards of the Derwent Valley.

I like to think of agribusinesses as being like individual plants within a sword of pasture. Sometimes there’s a relatively small number of species all competing within the same space. In other words, there’s a limited number of agribusinesses, all with fairly similar business models, in an area. Sometimes there’s a more diverse mix of species in the pasture. In other words, there’s a greater number of agribusinesses with different types of business models and operating at different scales, in an area.

In a biological ecosystem, like a pasture, each species has different requirements that enable it to take advantage of its particular place in the pasture ecosystem. And it can be the same if we apply this ‘ecosystem’ concept to agribusinesses.

I’d like you to think about the concept that it is possible to plan an agribusiness to take advantage of its particular place in the ‘ecosystem’ of the agribusiness environment within which it is located, to take advantage of a ‘niche’ in that ecosystem so that it can thrive and survive.

So this is the basis of how I’ve structured this next topic, on Agribusiness Planning.

Again, in Term 3, there is a specific Unit called ‘Agribusiness Planning’, so this week’s lecture is very much an introduction to this subject. What I really want you to focus on is not the specifics of ‘how’ to do business planning (we will do that later in the year). What I want to focus on is the ‘why’ of Agribusiness planning.

So, in essence, I’ll be asking you to think more about ‘what we need to plan for, and why’ rather than jumping straight to the ‘tool box’ to look for a planning tool that might help.

As an agribusiness manager, one of the things you’ll do over your career is to assemble a ‘tool kit’ of planning methodologies, or tools. Some of these will be simple and you’ll pick them up and learn them very quickly. Others will be more complex and will take some time to master.

As you assemble more tools for your tool box and get more experience in using them, you’ll become an expert at picking the right tool for the job.

Let’s start that process now, by thinking about the kinds of things we need to plan for in an agribusiness context, because, as someone once said and it’s been commonly picked up ever since, “To fail to plan is to plan to fail”

Why Plan?

The fundamental reason why we plan is because, as Benjamin Franklin once (apparently) said: “To fail to plan is to plan to fail”. In other words, if we don’t plan how we are going to achieve our goals, we will never succeed in achieving our ‘why’.

We all use planning, to varying degrees, in our personal and professional lives. I’m sure you’ve all set out goals and plans for achieving them, whether it’s a savings plan to buy your first car or a planning a holiday.

Because, after all, “A goal without a plan is just a wish” (Antoine de Saint-Exupéry).

So what is planning, in its essence?

I define planning as: the process of documenting a logical progression of tangible actions that, when combined, contribute to a defined outcome or goal.

Planning is a primary function of management.

There are many reasons why we need to plan in any agribusiness. The relative emphasis we need to put on each area of planning depends on the nature of the business, the scale and scope of our business and how much of the value chain it encompasses.

The main tool within the business planning ‘tool box’ is the overarching ‘business plan’ that sets out the vision, goals, value proposition and assumptions underpinning your business.

It is this plan that is often used to take to financial institutions or private equity funders to secure financial resources to start your business.

But the process of developing a business plan is probably more important than the plan itself, because it is through the act of planning each aspect of the plan that you can design, refine, test and re-design your business.

Watch this short video that describes why a business plan is important and the key components of a business plan | 8:49mins

The key reasons 'why' you need to plan in business is to:

Define your goals: Establishing a mission and vision will help you define the scope and scale of your business.

Set goals and set out how they will be achieved, by setting short, medium and long-term goals.

Help your investors, staff and customers identify with your vision.

Define your value proposition or unique selling proposition.

Understand where you ‘fit’ – who are your competitors; are there similar products/services in the market? What are the trends in your market?

Identify your customers and analyse the size of the market.

All of these things help you consider the opportunities, constraints, enablers and blockers to you achieving your business goals – your ‘why.’

Other reasons to plan

There are many other reasons why we need to plan and many of these will inform the overarching ‘Business Plan’.

For example, a primary producer will have to plan things like:

The physical layout of the farm, to ensure the most efficient production from the land and water resources available and to match land capability and productivity expectations. Without having a good understanding of the carrying capacity or productivity of the physical assets of the farm, developing production forecasts, to inform the assumptions within your business plan, cannot be completed without a level of confidence to support your business case.

Conformity with legislative requirements; work health and safety, food safety, etc. all have their own systems and record-keeping requirements which will require attention to how you plan and manage your business.

Quality management system: Many primary producers are now required to implement some form of quality standard, whether part of a supply contract (e.g. with a supermarket) or an international standard (e.g. ISO

Labour: planning for peaks and troughs in labour requirements, for example at sowing, harvesting, etc.

Production planning: timing of sowing, agronomic inputs, watering, harvesting. These would all need to be timed in accordance with seasonal requirements and possible variations, and may need to be refined based on the timing of the product hitting the market, for example to take advantage of higher seasonal prices.

Water use and water supply: particularly where irrigation is used.

Cashflow Planning: funding of input costs, cashflow budgeting, production forecasting, estimated crop values, etc.

Financial Planning: Funding capital works; calculating the best return on investment etc.

Livestock planning: breeding, animal health (vaccines, inoculations, drenching, etc.)

Plant and equipment: all need to be justified financially and their maintenance and replacement programmed.

Fixed infrastructure: buildings, fences, reticulated water supplies, etc. need to be planned and designed to meet their functional requirements; we also need to plan for their maintenance and their replacement, particularly for fixed assets that have shorter life-spans.

An agricultural contractor (or an agribusiness servicing primary producers), in addition to many of the above, would have to think particularly about:

Workflow planning: balancing seasonal variations in terms of labour and equipment demands.

Customer management: attracting, keeping and managing customers. You have to be able to service your customers’ needs, on time and on budget or you won’t have them for long, so planning workflows; plant and equipment requirements; communications; etc.

Business financials: time and expense tracking and invoicing; record keeping

Planning Tools

Each of these types of plans, or planning processes, will require different tools and methodologies or approaches.

Later in the year, you will learn much more about specific planning tools. However, there are two tools that I would like to start getting you familiar with to start with.

One is a ‘business plan’ template tool and the other is the ‘Business Model Canvas Tool’.

This week I want you to download and start familiarising yourself with these two tools.

Business Plan Templates

There are innumerable templates for ‘business plans’ available on the internet. Some of the better ones for agribusinesses are those developed by banks that sell products into the agribusiness sector.

The NAB offer a downloadable template:

The ANZ have a version that can be completed online and then exported into Word for editing off-line

We are not asking you to complete a business plan here, now. What we want you to do though, and to reflect upon in your portfolio, is to define the key headings you would use in a business plan you would write for your bank/funders if you were starting a new business and/or expanding an existing one.

Task: Download two or more business plan templates from an online source. Compare the content/headings of each.

In your portfolio, list the headings you would use in preparing a business plan for a new agribusiness or expansion of an existing agribusiness.

Business Model Canvas Tool

Download the Business Model Canvas:

Then, watch this video on how to use the business model canvas, using the PokemonGo business as a case-study

Pokemon Go | 7:51 mins

And, read this blog on the Strategyzer website:

This article explains the advantages of using tools like the ‘business model canvas’ as a ‘rapid idea assessment’ tool and its advantages over more traditional ‘business plan’ tools and raises some very good points about the relative effort you might put in to testing your ideas before progressing them to a full business plan.

Reflection

In your portfolio, please record two things:

A) Reflect on the differences and similarities between the Business Model Canvas and your typical Business Plan Template.

B) Which tool do you think would be most useful to you in planning a new business venture? And/or, which would be better for helping you improve (innovate) an existing business?

Credits:

Created with images by janua2000 - "pepper vegetables vegetable" • herbert2512 - "sheep lamb animals" • Unsplash - "suit man dapper" • yoppy - "planning" • WerbeFabrik - "plan build draw" • DariuszSankowski - "old retro antique" • StartupStockPhotos - "office startup business" • qimono - "idea empty paper" • Zorro4 - "mural girl balloon" • EffervescentEva - "Reflection"

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