Edition #1

April 24, 2023

Good morning and welcome to the inaugural edition of The Agri-Business Braintrust newsletter. For starters, I want to thank each and every one of you for signing up to be a part of this community. The support has been tremendous and I’m excited to get to work building something valuable, lasting, and fun!

A few notes to begin:

• The content and resources need to add value to you. Through my experience starting businesses & working as an agri-business advisor, I have ideas on what to include… but I welcome you to offer suggestions. Feedback is encouraged.

• This is a brand new concept that I’ve never done before, so there will be potholes and speed bumps along the way. I’ll work to smooth those out as they come up, but just know I’m learning a lot of this stuff along the way.

• If you want to share your insights or content, have recommendations, positive or negative feedback, or want more personalized in-depth help with anything, here’s my email address: [email protected]

Alright, let’s get to the topics that will help you build a strong, sustainable agri-business.

-Clint

Here’s what we have this week:

• 📃 Business Plan (Part 1 of ?)

• 🏠 Agritourism

• 📝 Legal Entities

• 📈 Ag Loans

BUSINESS PLAN SERIES - Week 1

If you’ve ever gone on a trip, I doubt you woke up, jumped in the pickup, drove around for a few hours, and magically ended up exactly where you wanted to be at exactly the right time.

No, you had some sort of a plan to get where you wanted to go. That plan might have included:

• Creating a list of things to bring

• Packing your bags

• Booking a hotel room

• Fueling up the pickup

• Jotting down an itinerary

• And so on and so forth…

Agri-business is no different. Successful farms and ranches don’t just happen by mistake. They are the result of a well thought out plan that allows for growth and flexibility designed to reach a distant goal.

Whether you have been running a farm for years, are looking to start one from scratch, or are somewhere in between, you ought to have a business plan.

So, over the next few weeks, we’re going to build out your agri-business plan together. If you choose to follow along, you’ll end up with a road map for success giving you more clarity to achieve your goals.

Let’s begin…

Part 1: Business Description

A Google docs business plan template will be used to create our unique plan. You can access it here: Business Plan Template (make sure you save a copy before you start editing it for your business)

Note: I did create a quick logo on Canva to really personalize the business plan. If you’re using the business plan only for your own uses, there’s no need to go through this step. However, if you plan on using your business plan to submit to a bank or potential investor, it’s a good idea to add a logo to make it “look and feel” official.

Okay, we’ll begin with systematically working through the Table of Contents. Some sections will be more in depth than others, and some may require additional resources. For instance, our financial modeling will utilize some supplemental spreadsheets.

But don’t worry, we’re going to walk through all of this together.

First, there’s a boilerplate “Confidentiality Agreement” that can be deleted 99% of the time. I’m leaving it in, just in case you want to raise money from an investor for your business. Most likely, you can remove it.

Next, there’s an “Executive Summary.” This is a very important part of the overall business plan. It condenses all the details of your plan into an easy to digest summary. Because we need all relevant information, we will write this LAST.

Now on to the “Business Description”

This section explains the basic elements of your business. Think of it as a way to define what you are building/have built.

1. Name

2. Key People

3. Paragraph Summary - Your “elevator pitch” for your business.

4. Mission Statement - What is it you’re trying to stand for?

5. Values - What you want to be known for.

6. Goals - Short Term (1-2 yrs) Mid Term (3-7 yrs) Long Term (10+ yrs)

7. Target Market - Summarize. Will be explained more thoroughly in Marketing Plan.

8. Legal Structure - How is the entity formed? (Sole proprietorship, LLC, Corporation, Partnership)

   *There’s a brief breakdown of the various options for legal structure later in this newsletter.

Pretty straightforward so far… here’s our example for Sample Farms, LLC 👇

Now it’s your turn!

Homework: Over the next week, spend some time thinking about your business. Carve out an hour and fill out the eight elements of your “Business Description.”

Next week, we’ll cover Section III. Products & Services with some in-depth descriptions and examples.

Questions? Ask them. [email protected]

SEEDS

• 🏠 Agri-tourism: Here’s a survey that explored agritourism and direct farm sales as additional revenue streams for ag operators. Some takeaways are those operations with highest agritourism traffic also have highest value-add direct farm sales, most of these operations are located on either the East Coast or the West Coast, and women-run operations are most common to have an agritourism or direct sales component.

  - Depending on your location, agritourism and direct farm sales may be a good opportunity to diversify your income streams with little capital costs.

• 🪙 Tax Planning: This article discusses the importance of communicating with your CPA and/or attorney on potential tax issues in the coming years. With power changes in Washington, changes to the tax code often follow. Make sure you are prepared for what the tax future may hold.

• 🌳 Cost Sharing: If you’re in Maryland, you may want to investigate a new program offering a $2 per tree bonus for planting trees. If you’re not in the Northeast, it’s a good reminder to check with your local Department of Ag or conservation district to see what kind of incentive programs may be available to help cost-share improvements or get paid for things you’re already implementing on your operation.

• 🐷 Hog Heaven: Here’s an inspiring story of how Tosh Farms leveraged contracting hogs to grow from 0 to 36,000 sows on their pig farm since 1994.

LEGAL

You’ve most likely heard that you should create a business entity once you start a business. Generally, that’s good advice. But there’s no one-size-fits-all approach.

Let’s look at the 5 business entity types that agri-businesses could fall into:

1. Sole Proprietorship

This is where one person owns the entirety of the business, personally. It’s a common beginner structure and more than a quarter of farming operations are sole proprietorships. The benefits are that it costs nothing to set up and you are in control of all decisions, profits, and expenses.

The drawbacks are that you are personally responsible for any debts and liabilities the business incurs.

2. Limited Liability Company (LLC)

An LLC can be created with one or more people (called members) and is incorporated with the state. LLCs are very popular due to their ease of setting up and their flexibility. The benefits are that they generally protect the members from personal liability on debts and lawsuits, and they offer “pass-through” taxation which means net income is not “double taxed.”

Some drawbacks are creating the Operating Agreement (documents that govern how the LLC & the members function) and less structure and court guidance than corporations for dispute resolutions.

3. Partnerships

Often two farmers want to share resources and they form a partnership. For example, one farmer may contribute labor and the other contribute equipment. The role of each partner and their contributions should be spelled out in a legally enforceable partnership agreement. Profits and losses are shared according to their agreed upon percentages.

A drawback to partnerships is that each individual is personally responsible for business debts and liabilities.

Typically, farming partnerships will be formed by two LLCs. Example: Farmer A, LLC owns land and Farmer B, LLC owns planting equipment. The two LLCs form a partnership to farm the land. This way, there are two taxable entities for federal payments and the LLCs should shield the individual farmers from personal liability.

4. Corporations

One or more owners (shareholders) can form a corporation. These provide protection to the shareholders from personal liability, and offer the most flexibility if raising money from investors is the goal. Shares are easily sold to raise capital and, unlike an LLC, the company remains in business if major shareholders leave.

Drawbacks to corporations include the expense of setting it up, the strict corporate governance, and the “double taxation” of profits. That means that profit is taxed both at the corporation level, and then again when the shareholder receives the income.

5. Cooperatives

Two or more individuals or companies can form a cooperative. They’re owned and controlled by the members of the co-op and typically used to serve the members needs, first.

Co-ops are not frequently created for single business entities like farms and ranches, and one of the reasons is every member of a co-op has an equal vote, regardless of their contribution to the business.

In summary, there are varying entity structures to be considered, and each has unique benefits and drawbacks. We’ll explore some examples of each type in the coming weeks and dive deeper into what structure might be best for your operation.

FINANCE

You’re most likely aware that interest rates are rising and that’s putting the pinch on many operations. It’s something we all need to be aware of, and in the coming weeks we will explore some alternative ways to handle capital needs in a rising rate environment.

Here are results from a Fed survey on farm loans from Q1:

 → Average Interest Rate Charged Reached Highest Level since 2007

→ Three Quarters of all New Loans had Interest Rate above 7%

→ Non Real Estate loans decreased 10% (operating lines of credit, livestock, & equipment loans)

→ Number of operating loans were historically low, but the size remained average

MEME OF THE WEEK

That’s a wrap, folks.

Until next week, thank you to everyone involved in ag. Let’s grow profitable agri-businesses together.

I’m working on putting together a referral program. I hope it truly helps you out. What would incentivize you to refer The Agri-Business Braintrust to your contacts? Would $50 for every 3 new memberships you refer be attractive?

Let me know in the comments below.

I’m thinking this newsletter ought to go out each Saturday morning going foward. But I want to hear from you.

DISCLAIMER: All content, communications, and resources provided by Agri-Business Braintrust, its principals, operators, or members is intended to merely be educational and entertaining. Nothing published by Agri-Business Braintrust should be relied on as legal, financial, investment, or other professional advice. Investments and legal matters involve substantial risk and are not suitable for all individuals. It is recommended to enter into a client relationship with an ESP for obtaining professional advice.