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Business Planning
for Dairy Farms
Hope is not a plan!
Business planning does not need to be as complex as As with all businesses in agriculture, the target (Where
many may think some meeting structure to follow you are going) is influenced by forces beyond your
with key people in your business and the minutes controlmilk prices, seasons, $A, fodder prices and
of your business planning meeting can become your processor requirements for example. A simple tool
business plan! (SWOT analysis) that takes into account these constantly
The business planning framework focuses on 3 stages changing business variables, can help to create new
NOW (or your resource stocktake), WHERE are you thinking (new strategies) at your business planning
going (or your preferred business future) and HOW (the meeting just as it may confirm existing thinking.
strategies) do you plan to get from NOW to WHERE) Good business plans are practical and may not only be
see below. used just for loan applications, starting a new business or
Land attracting investment. They can also be useful for:
HOW NOW Livestock Reviewing the business direction, and setting goals
Business
People
and responsibilities to guide it. Defining agreements
between partners.
Evaluation of new ideas towards enterprises, capital
WHERE expenditure and expansion.
Assign actions, measure and track implementation
Succession planning.
For success, your business planning meeting should There should be time set aside for regular review of
involve all of the key people involved in your business. your business plan. In past years forces beyond your
More heads are better than one and when later it comes controlmilk prices, seasons, $A, fodder prices and
to implementation if they are only your ideas it may processor requirements for example have affected the
well be harder to implement than if they were our ideas. dairy industry in such dramatic ways that a regularly
Key people could even include your bank manager, revised business plan could help to build business
accountant and/or your farm consultant! resilience. Therefore it is important to keep it simple as
At your business planning meeting, realistically define nobody likes reading a long business plan.
the present situation (Now), past history and how past The business plan is not the endpoint but merely a
business performance compares with against industry means of communicating future plans. The end point is
benchmarks (a role for your bank manager, accountant discussion and communication.
and/or farm consultant?).
Business Planning Case Study #1
Glen Lamond at Delamere, is a family owned dairy How (to get from Now to Where)
business running on 210 acres. It has operated since Employ more shed staff.
1983 with family labour, that is now grown up and How to exit determine pathways/strategies
with their own careers and families. for different scenarios:
Best case scenario.
Now (stocktake of resources)
Worst case scenario.
Strong equity position.
Average scenario.
Low staffing levels (labour heavily reliant on
Ride out dairy crisis and erode equity.
Michaels time and energy).
Scale of dairy farmtoo small for viable share farming New actions/thinking/outcomes
as a method of exit; too expensive for beef operator 1. Employed labour:
to purchase outright. Michael shifted out of the shed into farm
Mature workforce, was mostly family which have now improvements/management.
sourced own careers. Michael: different work, different outlook!
Dairy business supported by off farm income. Not pushed for time (ahead of the bushfire,
Lots of talking about succession/estate planning. not fighting fires).
Rivington Partners at Back Valley, is a family owned How (to get from Now to Where)
dairy business that has been operating since 1923. Maintain trust/good relations with strategic alliances.
It is an example of one of the bigger dairies on the Mitigate key person risk (life, trauma insurances).
Fleurieu Peninsula milking over 350 Friesian cows at
Investigate and continue to implement pasture species
high milk volumes. It is also one of the older dairies
suited to dry land pasture system. Improve pasture
having started as a dairy in 1923.
production and utilisation = lower cost dairy and less
Now (stocktake of resources) reliant on purchased fodder.
Build cow numbers to increase cash flow and
In the process of weathering a perfect storm of
business profitability.
prices, drought, seasonal fluctuations.
Begin succession planning.
Damaged equity as a result of perfect storm.
High value of land. How does one obtain a reasonable New actions/thinking/outcomes
return on investment? The business planning helped get partners talking
100 year family history. together with the plan as the reference point.
Well-connected and well known in the dairy industry. The process clarified the issues, clarified the thinking
were now all on the same page.
Where (are you going?)
Prompted the creation of a plant replacement and
Succession planning owing to age of partners and
infrastructure schedule which will feed into budgeted
other interestswhere do we live? Where/how does
cash flow and borrowings. A useful discussion point
future income come from? What will we do? How do
that will be helpful in discussing replacements.
we handover?
Provides a useful basis for ongoing discussions with
Managing business capital expenditurehow do we
professional advisers.
catch up our capital works program.
Undertook a thorough analysis of milk supplier prices
Construct a viable, resilient business for
and timing of payments to determine the best supplier
future operators.
for our milk production.
Healthy happy people.
Undertook an analysis of calving pattern versus milk
Exit strategy (line in the sand)worst case scenario supply, prices and fodder costs resulting in keeping
and plans dont go to plan, exit strategy should ensure current calving pattern for now.
equity and options are maintained.
The Business Review and Planning process was undertaken with For further information on business planning go the the
the farmers by Chris Scheid and Lachlan Hood from ProAdvice. Planning for the Future section of the Dairy Australia
The information in this publication was prepared by ProAdvice. The People in Dairy website.
Contact 08 8552 9641 or cscheid@proadvice.com.au www.thepeopleindairy.org.au
February 2013