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Missouri Department of Agriculture

Ag Business Development

Planning

The following are some of the steps you need to take during the Planning Phase:

Review your legal organization, and determine what regulatory requirements, taxes, insurance, and intellectual property issues need to be addressed. Your attorney will assist you in designing an organization that meets the needs of your own group of producers. You will formalize the initial board of directors at this time, so you will need to identify board members with board officers. The steering committee should answer several simple questions before meeting with your attorney to develop your organizational documents:

Who Do You Want to Own the Organization? How will your organization be capitalized? Where will your equity come from? Will it only come from agricultural producers? Will you obtain equity from other sources?

Who Do You Want to Control the Organization? Should the organization be a democratic one, with one-member/one-vote? Or should voting rights based upon level of investment? Who will make decisions?

Who Do You Want to Benefit From the Organization? How will contributors of equity capital benefit from the organization? Will rewards come through higher commodity prices paid to producers? Through stock dividends? How will profits be distributed--returned to investors, reinvested in the business to fund operations or future expansion, or returned on the basis of patronage?

Begin writing your business plan. The business plan is an important document in that it becomes your action plan for creating a successful business. The business plan uses information you collected in the market feasibility stage and creates an implementation plan, which will include financial, governance, procurement, risk management, operations and management issues.

Determine plant and equipment needs. Your market feasibility study should provide guidance in your specific plant and equipment needs for your new venture.

Determine how you will finance the business. You should estimate that at least 40% of the total project cost will need to be provided upfront-this should primarily come from producers, but additional equity could be obtained through private sources. Your ability to raise funds from producers and non-producers is affected by state and federal tax, securities and corporation laws. You may also be eligible for tax credits, loan guarantees, and other financial assistance, however these programs often have specific requirements that may affect how you will need to structure your business.

Determine whether producers will need to make any changes in production practices to meet any quality requirements necessary. If you are going to sell a high-quality processed good to consumers, you will need a quality control system throughout the entire process-from gate to plate-to ensure a quality end product.

Select a site for your operations. Selection of the site is critical as your location must be competitive in terms of transportation, input procurement and/or proximity to consumers. It may not always make financial sense to have a processing facility in your own town. If your goal is to obtain a positive return on investment in the value-added venture, you must be open to looking at sites away from your local area.

Obtain feedback on your business plan from persons not involved in the project to make sure your business plan has addressed required issues and makes sense to other persons. Sometimes an outside perspective can help you identify areas that need clarification or improvement.

Hire initial human resources, the staff who will run the business. Your hiring decisions are critical, especially early management you may hire to oversee the construction and equity drive. You should hire people with experience, and you need to realize that hiring capable people with experience may be costly.

Meet with engineering design and construction firms. Meet with several engineering design and construction firms to determine which firm has the services and price which best fit the specific needs of your project. You will likely want to competitively bid your design and construction projects to make sure you can make an informed comparison of the services and prices offered by competing firms.

Once you have completed a comprehensive business plan and you have a clear plan for capitalizing and implementing your business, you are ready to move to the Implementation Phase.

The Ag Innovation Center staff is here to assist you in starting or expanding your agriculture-based business. Contact us today!