Issue No 10, July 1998.

NOTICE: Hard copies of the Australian New Crops Newsletter are available from the publisher, Dr Rob Fletcher. Details of availability are included in the Advice on Publications Available.

11. Business and farm planning and new crops

David Freeman
Managing Director
Research, Training and Development Institute of Australia
PO Box 694, Taree NSW 2430
Telephone: 02 6553 2551
Facsimile: 02 6553 2551
Email: freeman@iniaccess.net.au

[David Freeman has been involved in agriculture, engineering and business development since 1969. During that time, he has grown most cereal and oilseed crops under dryland and irrigation and has been involved with cotton farming, wine grapes, native flowers, pasture, bush and grass seeds, cattle, sheep and rabbit farming. His background also involves men's health, nutrition and healthy cooking. David is the author of 49 books covering business development, food services, Australian history and family history.]

Business and farm planning is absolutely essential in today's market - and especially so with new crops.

The essential secrets are:

we should not put all our eggs in one basket i.e. we should not rely on one tried or untried crop for all our income,
we should plan ahead so that there are no surprises; we do not need
surprises,
we need to take responsibility for our own actions so that there is
no one else we can blame if the project fails,
we need to be in control; this applies even if it means making the
decision to close the project down; a controlled decision of this type is not a failure; think of the financial outlay we have saved in the future.

As a business consultant and facilitator, the brief to myself is that my clients do not lose any money, or that they minimize the amount they do lose, as opposed to necessarily making money. Even then, it is not just about making money, it is about making a profit.

Most business plans commence by looking at visions, passions and the mission in hand. They address short and long term goals and the historical aspects, both personal and business, which have lead to this decision to venture into the commercialisation of a new crop.

This type of plan is all very well when approaching the bank for finance.

What we really need to know is more basic information which we need to glean from some very basic research such as:

will anyone buy the product at the end of the day?
if people want to buy the product, how much will they buy, in what form, at what price and how often will they buy it?
who are these people, where do they live and how will we get the product to them?

There is a strong need in new crops to understand the answers to the following questions:

how many other people will jump on the band wagon?
what have the climates in which the new crop traditionally grows, been like?
will the crop become adapted to our place?
how many areas are suitable for growing it today, with or without the benefit of artificial support such as water, shade and trace elements?
how many tonnes are currently produced anywhere in the world and how much can we produce?
is the product all the same quality; what grade is currently produced and what grade can we produce?
can the product be sold in various forms such as dried, chemical-free, bio-dynamic, organic?
can it be extended by processes such as chopping, dicing, slicing, or packaging in small quantities?
can it be value-added such as cooking, steaming, being frozen, steeped or manufactured into bulk food or portioned?
can it be packaged differently such as by cryovac, in ship loads, train loads, containerised, boxed, bagged or bulk?
does it need controlled temperature transfer and in what condition is it expected to arrive?
is there suitable warehousing at this end and the other?
do we require an agent?
what assets such as plant and equipment do we need?
have we got anything that can be adapted to satisfactorily do the job and if so, does it need modifying?
when will our existing equipment wear out, or when will it need to be phased out as technology improves? Plant and equipment requirements should be planned for the future ten years, at least.
is our shedding, building or storage cover adequate for what is required?
do we need any additional labour besides the family; if so, how available are they and what level of continuity can we commit to, as far as work load and finances are concerned?
can we afford the overheads such as work cover, superannuation and holiday pay which are required for our additional helpers?
do we need extra training; can it be undertaken locally, within Australia or does it need to be overseas?
is anyone else in our district interested in the same crop; if so, is it worth joining forces and forming a co-operative, or undertaking a joint venture arrangement with them for the purchasing and sharing of resources such as plant and equipment, labour, transport, training and research?

Next, it is time to undertake a paddock or plot plan with timing details for ground preparation, row and plant spacing, additives, maintenance, watering and harvesting requirements. It is important to check such items as the following:

is the size of the gates adequate to ensure equipment can fit through?
is there a requirement for on-farm weather-proof storage?
what are the natural predators of the plant or its product; do we need extra fencing?
will our customers or government regulation allow us to use pesticides or herbicides?
are there any natural alternatives or other approaches for combating or reducing the impact of pests?
what are the costs entailed in pest control?
what funds do we need to find before we even start?
what are our preliminary establishment costs; are there any fees, licences or association memberships?
do we need to pay any bonds to any utility authorities such as water, power, communications or environmental organisations?
do we need a development or building application from the local or state authorities?
is the new crop perennial or annual?
where can we get some advice?
is the new crop winter or summer growing?
do we need to get up in the middle of the night to change the irrigation?
do we have sufficient space to make the new crop production economically viable?

After all this, it is time to begin a cash flow budget with every detail for the first two years, and then an annual summation thereafter for the next three to five years depending on land, asset and machinery requirements.

The cash flow budget identifies when funds are required and when they actually are received. The bottom line should be a progressive total so that we can know at any one time how much is in the bank - or not in the bank.

A cash flow budget is really the viability element of our business plan. It is the figurative summation of all our research, arising from such questions as those listed above. It is the bottom line that is placed before our partners and supporters for approval and support before any action commences.

Partners could include our family, our financier, our mentor or our best dog. When the going gets tough or the pleasantries need to be shared it's always good to have these partners around.

If finance is required, whether it is sourced publicly or privately, financiers need to see two things; security on a loan and ability to repay.

A good business plan must be able to show both.

The final question is: do we still want to go ahead?

Most importantly, we are now making this decision from an informed basis as opposed to an emotional one.

Once complete and our subjective decision has been made, it is time for an objective opinion and professional help. It is too easy to risk our livelihood on subjective interpretation.

There are free services available in Australia through government agencies such as the State Departments of Agriculture/Primary Industry and the Business Enterprise Centres in regional centres.

If exporting there are Federal government departments such as Customs, Primary Industries and Austrade.

All State and Federal government departments are now on the Internet. For federal government assistance and aid, Bizlink (http://bizlink.ausindustry. org.au/index.htm) is a one-stop information resource that can be accessed through the Internet, State and Regional Development Offices and Business Enterprise Centres.

Private consultants can be accessed through AusIndustry, State and Regional Development Offices and Business Enterprise Centres.

Any claims made by authors in the Australian New Crops Newsletter are presented by the Editors in good faith. Readers would be wise to critically examine the circumstances associated with any claims to determine the applicability of such claims to their specific set of circumstances. This material can be reproduced, with the provision that the source and the author (or editors, if applicable) are acknowledged and the use is for information or educational purposes. Contact with the original author is probably wise since the material may require updating or amendment if used in other publications. Material sourced from the Australian New Crops Newsletter cannot be used out of context or for commercial purposes not related to its original purpose in the newsletter

Contact: Dr Rob Fletcher, School of Land and Food, The University of Queensland Gatton College, 4345; Telephone: 07 5460 1311 or 07 5460 1301; Facsimile: 07 5460 1112; International facsimile: 61 7 5460 1112; Email: r.fletcher@mailbox.uq.edu.au

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originally created by: GK; latest update 6 June 1999 by: RF