Business Planning for

Livestock Producers
James McWhorter
UF/IFAS Highlands County Livestock Agent

Introduction
Why create a business plan

Components of a business plan

Financial statements
Five Cs of credit
Modifying your plan

Beef Industry
91% of the ranchers in the United States have 100 head or less.
This group also owns 45% of the U.S. beef herd
81% of the ranchers have 50 head or less
This group owns 30% of the U.S. beef herd

2012 Census of Agriculture

Beef Prices

Why Create a Business Plan

Planning is the most vital part to any successful business

It allows you to set realistic goals and compare your actual results
with your anticipated results.
This allows the owner / manager to quickly identify problems before they
get out of hand

Having a plan explains your ideas to lenders if you are looking for
financing.

Business Plan Components

Executive Summary
Business Description
Operations
Marketing Plan
Management & Organization
Financing Plan

Executive Summary
The Executive Summary is the key points in your business plan

Includes:
Mission Statement: one or two sentences that sums what you want to do.
Goals
Keys that will make your business successful

Business Description
This section describes your farm/livestock business

This section should include:

A business overview
Location(s)
Facilities: Cow pens, barnsetc and the condition.
Business history
Ownership structure
The legal structure of the business and why you chose this structure

Operations
This section describes what you produce, how much you produce, and how
you produce it.
Included in this section:
The breed of livestock
Average production levels
Describe your production methods

Marketing Plan
The Marketing Plan should be realistic plan explaining how you
will sell your products.
The section should include:
What you are selling.
Where you are selling.
Who are your customers.

Management and Organization

This section describes who manages the operation.

Should include:
Qualifications and experience of managers
What management functions they serve
Professional services: What vet you use, any outside labor, where you
purchase vaccines and nutritional products, and what, if any, lending
services you use.

Financial Plan
This section describes how you will be financially successful.

Includes:

Financial position
Historical performance
Any financial projections
How you manage your assets
Capital requests

Balance Sheet
Included in the financial plan should be a balance sheet and an
income statement.
A balance sheet shows the ranches assets, liabilities and equity.
Simply, it provides the net worth of the ranch.
Lenders want to know what the ranch owns and what the ranch
owes. It provides a snapshot of the ranches ability to pay its debts.

Balance Sheet
Assets
Current Assets
Feed Inventory
Roughage
Grain/Concentrate
Protein Supplement
Salt/Minerals
14) Total Feed Inventory
15) Prepaid Expenses
16) Cash (Checking, Savings, etc.)
17) Misc.
18) Total Current Assets

Pounds

Total Value
600
0
600
250
1450
0
5500
0
6950

Non-Current Assets
19) Machinery and Equipment
20) Real Estate Buildings and Improvements
Head
21) Replacement Heifers (1 yr olds)
3
22) Bred Heifers (2 yr olds)
3
23) Mature Cows
10
24) Bulls
1
25) Other Non-Current Assets (Horses, etc.)

5000
60000
Base Value
2000
2500
1400
2000

26) Total Non-Current Assets

27) Total Assets
Liabilities
28) Current Liabilities
(Accounts/Notes Payable, Accrued Interest, Accrued Taxes, etc.)
29) Non-Current Liabilities
(Machinery, Real Estate, Livestock, etc.)
30) Total Liabilities

Total
6000
7500
14000
2000
0
94500
101450
(line 27a)
6500

20000

26500

Income Statement
In addition to the balance sheet, an income statement needs to be
included in the financial plan.
An income statement details all the incomes and expenses of the
ranch to provide the net income of the ranch.
Income statements show the profitability of the ranch and can
provide insight on the cost of operating a ranch.

Income Statement

Income Statement Expanded

Cows

1) Exposed females.

10

2) Adjusted exposed female inventory

10

Calves
Steers/Bulls
3) Total head of calves weaned

Heifers

All Calves

4) Total pounds of calves weaned

900

1500

2400

5) Average weight of calves weaned

300

300

300

6) Average price per pound (value) of calves

2.25

2.25

2.25

Totals
7) Percent weaned calves

80%

8) Total dollar value of all calves weaned

5400

9) Pounds weaned per exposed female

240

Income Statement Expanded

Revenue
$

Weaned Calves

Gain / Loss on Culls

Mature Cows

Head

Average Price/hd

Total

1200

1400

Heifers

$/hd

$/hd

Bulls

$/hd

$/hd

Heifers Held for Replacements

Base Value

5400

675

-200

-675
-875

Other Non-Calf Revenue

Total Revenue

4525

Income Statement Expanded

Expenses (Cash and Non-Cash)
Purchased Feed, Supplement, and Mineral

3000

Lease/Rental

Labor, management, family living (Paid and Unpaid)

Veterinarian/Medicine

250

Interest

Other (fuel, supplies, taxes, insurance, repairs, etc.)

250

Depreciation

Total Expenses

3500
(line 36)

Annual Cow Cost

350

Total Net Income

1025

AgPlan
AgPlan is a free online agricultural business plan generator
provided by the University of Minnesota
It walks the user through all the sections of a business plan and
provides examples and tips for writing each segment.
Users can save, print, and share the business plan from the
website.
https://www.agplan.umn.edu/

AgPlan

AgPlan

Five Cs of Credit
Lenders base their decisions on the five Cs of credit when they
evaluate someone or a business for a loan.
Character
Capital
Capacity
Collateral
Conditions

Character
The owners skill for ownership or management of the ranch.
Credit history, education, references.

First impression.

Capital
This is the business equity

The equity is determined by the balance sheet.

When writing the business plan it is important to use realistic
values for your assets on the balance sheet.

Capacity
Capacity is the business ability to generate enough funds to pay
the operating expenses, sustain the business in the future, and
provides owners living expenses.

Capacity can be determined by the income statement.

Collateral & Conditions

Collateral
Collateral in most cases will include land, machinery, and livestock.
The business has an obligation to maintain assets being used as collateral in
good condition.

Conditions
Conditions of the loan may require the business to keep a certain amount
of cash in the bank or restrict the business from borrowing additional
money.

Modifying Your Plan

Besides using a business plan for obtaining loans, a business plan
keeps you focused on a set of goals.
Unfortunately, not all goals are easily obtainable, but having a plan
and keeping records of inventory, expenses, and incomes can
explain how to reach those goals.
Over time, goals may change, or the initial goals you set may not
be realistic and should be changed.

Modifying Your Plan

We can see from the income
statement crop expenses were
higher than the income from crops
sold.
Reviewing past financial statements
can show than an enterprise within
the ranch was not profitable and
should be changed.
A business plan is not set in stone, so
be flexible, keep good updated
records and change the plan as
needed.

Summary
A business plan keeps you and your managers on track to achieve your business
goals
Keeping accurate records will help with business decisions and can lead to a more
efficient operation
If you do use a business plan to present to potential lenders, remember the five Cs
Goals and plans change so can a business plan