Preparing a Business Plan

The success of a small business often hinges on the decisions that were made well before the first product was ever sold. Having a business plan is a recognized management tool to document objectives and outline how they will be attained (1). A builder would not start out to erect a new structure, nor would a traveler begin a journey, without a plan. A business plan helps create realistic goals, make logical decisions, allocates resources, and measures the results of actions (2).

Business plans help protect against failure
For many small farm businesses however, writing a business plan does not happen unless a prospective financial loan officer requires one (3). After many years of running a business, owners often state they had not started their new operation with a plan or a mission statement. While it's true that this spirit of entrepreneurial and individual fortitude has propelled many small businesses to grow and prosper in the United States, for many new owners this is not the case. The U.S. Small Business Administration (4) estimates 80% of new businesses fail after just 5 years,

This large West Coast herbaceous perennial producer has extensive holdings including this large gutter connect Cravo retractable roof greenhouse. Without careful planning and attention to detail this operation would never have achieved the success it is known for.

and that more than 80% that survived the first 5 years fail during the second five. The reasons for lack of business success can be varied. Business owners can have problems making decisions, or lack sufficient experience needed in order to succeed. Owners can have problems relating to people, or have difficulty with organization or maintaining focus.

To help avoid this fatalistic statistic, small business owners need to develop a carefully designed plan. Management strategists theorize that there is a high degree of correlation between the extent of initial planning and the long term success of the small business (5).

During the initial phases of preparing a business plan entrepreneurs can review (6) of a wide variety of American enterprises, as provided by the U.S. Small Business Administration. In addition, the private firm, Palo Alto Software, Inc. (7), maintains a web page called Bplans.com that is provided as a free resource to help entrepreneurs plan better businesses. This site is updated daily with all sorts of tips for those exploring the possibility of developing their own company.

First develop a mission statement
A mission statement should be prepared the before the business plan. Simply stated a mission statement is a written statement that outlines the vision, direction, and future goals of your proposed nursery or garden center. The mail-order nursery owner and book author Tony Avent (8) states that the mission for his company is to: "…change the way America gardens by offering the best, the newest, and the strangest in fun, garden-worthy perennials to gardeners around the world." This statement allows customers to understand the aim of his company, as well as helps inspire customers to do business with him. A mission statement will help keep the new business on track as it grows. While some owners will state that they never took the time to actually write down a mission statement, the grounding factors that lead their business to success remained the same. While the business direction may have changed over time, the mission statement remained as leadership tool providing focus for the organization, direction for employees, and essentially a commitment to meet the basic objectives.

Managers should visualize a mission statement much like a rallying cheer rather than a mandate (5). The statement should be short and easily remembered. A well written mission statement can appear on plant labels, signs, brochures, tee shirts, web sites, and billing statements. Business owners should circulate drafts of their mission statements to their employees. The wording should be acceptable to the majority. It should be challenging, but clearly worded so as to be clear of jargon or empty phrases (9). It should inspire employees to feel a part of the company team. If some thought is put into its wording, it may well last for many years and serve as a true sense of pride of business ownership.

Assessing your business plans
A successful horticultural enterprise owner will have conducted a thorough analysis of the present business climate for the proposed type of operation being planned. A prospective wholesaler will have attended trade fairs such as the FarWest Show (10) show in Portland, Oregon, which is hosted by the Oregon Association of Nurseries, and is held each August at the Oregon Convention Center. It is one of the leading nursery and greenhouse industry trade shows in the United States. The show typically attracts 13,000-15,000 wholesale growers, retailers, landscape contractors, designers, architects, industry suppliers, educators and others from virtually every U.S. state and several foreign countries. In 2003 there were more than 850 exhibitors occupying 1,365 booth spaces (11). The FarWest Show highlights the type of plants and goods that wholesalers are featuring to re-wholesalers, landscapers, and owners of garden centers. By visiting with exhibitors from not only the Pacific Northwest, but also from other parts of the United States, a prospective business owner can gain an excellent snapshot of the ornamental industry and where the future my lead.

For those interested in a retail operation, the FarWest Show could be supplemented by attending The Yard, Garden & Patio Show (12), which is also hosted by the Oregon Association of Nurseries. This February convention is designed for the gardening public. The leading Pacific Northwest retailing garden centers and suppliers will staff the trade show booths at this fair.

By attending both of these trade conventions, and by visiting wholesale nurseries and garden centers throughout Oregon and Washington and British Columbia, a well-rounded overview of the Pacific Northwest's horticultural industries can be gained. Making assumptions about market size and potential is a valuable factor in any business plan (3). Nonetheless having a firm grasp of the market potential is one of the keys to working with lenders, as well as providing the basics of writing a business plan.

Components of a business plan
A complete business plan, as recognized by lending institutions, should include several components (see Table 1). Business plans that are too long generally reflect a business owner who is unsure of future plans. It's better to be concise. Use charts, tables, resumes, and studies if they contribute to the direction of the proposed business.

Title page and table of contents
The title plan should include the proposed title of the new business, the time frame covered by the plan, the name of the owner, the date the plan was prepared, the mailing address of the owner, an e-mail address, and a phone number. This page should look very professional when it's completed as first impressions will make all the difference to reviewers who look at many proposals.

Executive summary
Though the executive summary comes at the beginning of the business plan, it's the last document to be prepared. As the name implies the summary is quick overview of the business plan that can be read in less than five minutes. It should be written in non-technical jargon so that a reviewer, who may have no understanding of horticultural enterprises, can readily understand it. Table 2 outlines what should be included.

If the plan is written by someone who has not had a plant-based business in the past, the focus should be on previous business experience, public service applicable to horticulture, or community involvement that has sparked the interest to start a new business. The tone of the executive summary should be to inspire the reader (13). Often times the executive summary may be the only part of the entire business plan that is looked at.

Table of Contents
As it implies the table of contents will provide the reader with a guide to the individual sections of the plan. It should include all headings and subheadings within the body of the text.

Business Profile and Summary
This section represents an overview of the planned horticultural enterprise including. Review Table 3 for the statements that should be included for the profile and summary.

Business Description
In this section the owner will describe in detail the proposed product or services that will be sold, and how these will be unique. Refer to Table 4 for the details.

Market Analysis and Strategy
Any prospective nursery or garden center owner needs to be well aware of the current market opportunities for both wholesale and retail trade of plant stock and services. In this part of the business plan there should be a description of where the products or services will be sold, i.e. nationally, regionally, or locally. The American Nursery and Landscape Association (14) has an excellent summary page showing this data. The U. S. Department of Agriculture's Economic Research Service (15) released a report in 2003 which details the historical trade in bedding plants, cut flowers, herbaceous perennials, and nursery crops. This report lists the number of growers in each state, the size of greenhouse operations, acreage figures, and gross receipts. In the Pacific Northwest the state agricultural statistic departments of in both Oregon (16) and Washington (17) also have detailed summaries of sales data. The Oregon Association of Nurseries (18) as well as the Washington State Nursery and Landscape Association (19) also have relevant state data.

In terms of strategy prospective business owners will need to identify the segment of the plant industry that they plan to target. Options include wholesale bare-root stock, container stock, balled & burlapped ornamentals, turf, retail garden center, flowering pot plants, Christmas trees and greenery, landscape services, and many others. In Oregon the Oregon Association of Nurseries maintains a list of private consultants that can be hired to help develop a marketing strategy. Once a marketing strategy has been determined the business plan needs to describe the level of competition, and state whether the market is increasing or decreasing.

A market promotion description will have to be included. The wholesale ornamentals industry advertises in a variety of different fashions including trade shows (FarWest Show), newspapers such as the Capital Press (20), catalog sales, web pages, direct mailing, tours, and through the use of regional sales staff.

Financial Projections
As accurately as possible a list of all the startup costs for the proposed business, including fixed assets such as machinery, buildings, and land rent or purchase will need to be listed. There will also be the need for a list of inventory, supplies, and advertising and promotion costs. A projection of income, termed the cash flow statement, will need to be developed based on current prices for similar goods and services. From the cash flow statement a balance sheet can be generated showing projected assets and liabilities as the business develops. A certified public accountant (CPA) can help the fledgling business entrepreneur to setup the accounting system.

Human Resources Plan
The human resources plan describes the expected labor requirement over the first three years of the business. It should show the areas of responsibilities, previous experience, relevant training for each of the proposed managerial and key staff positions. In startup business plans list the proposed number of workers that will be hired over the first three years. If these workers will require advanced training, list that as well.

The final section of the human resources plan should show an organizational chart showing the line of responsibility for all managers, staff and workers. Reviewers of the plan will need to be convinced that a thorough analysis has gone into preparing for a well staffed company. Later, employees will have this data to review how the firm is organized. Loan officers will need to see the proposed compensation levels for the staff members. They will also need to review resumes for the managers

References
1. Preparing business plans. 1999. Rob Gamble. Finance and Business Structures Program Lead, Ontario Ministry of Agriculture and Food. Publication order number: 99-011.

2. Organizing a business plan. 1994. William Owen and Greg Passewitz. Ohio State University. Community Development Fact Sheet 1101-94.

3. Knowing your marketing- The most challenging part of a business plan. 2001. Charles Schlough, Department of Applied Economics and Management, Cornell University.

4. United States Small Business Administration, Washington DC.

5. Mission possible. Tanya Singley, Director of Operations at Blue Spruce Landscape, San Jose, CA. In: American Nurseryman, February 15, 1999.

6. Sample business plans. 2003. U.S. Small Business Administration, in conjunction with Palto Alto Software.

7. Palo Alto Software, Inc., Eugene, OR.

8. So You Want to Start a Nursery. 2003. Tony Avent. Timber Press, Portland, OR.

9. The Complete Guide to Garden Center Management. 2002. John Stanley. Ball Publishing, Batavia, Illinois.

10. FarWest Show, sponsored by the Oregon Association of Nurseries.

11. Oregon Association of Nurseries, December, 2004, Wilsonville, OR.

12. The Yard, Garden & Patio Show, sponsored by the Oregon Association of Nurseries, held in February each year, and the Portland Convention Center.

13. Building a Sustainable Business- A Guide to Developing a Business Plan for Farms and Rural Businesses. 2003. Gig DiGiacomo, Robert King, Dale Nordquist. Developed by the Minnesota Institute for Sustainable Agriculture, St. Paul, Minnesota.

14. American Nursery and Landscape Association, Washington, D.C.

15. Floriculture and Nursery Crops Situation and Outlook Yearbook. September 2004, Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Washington, D.C..

16. Oregon nursery and greenhouse survey. September 2003. Oregon Agricultural Statistics Service, Portland, OR.

17. Top 40 agricultural commodities in Washington state. 2003. Washington Agricultural State Statistics Service. Olympia, WA.

18. Oregon nursery & greenhouse industry statistics. 2003. Oregon Association of Nurseries, Wilsonville, OR.

19. Washington State Nursery and Landscape Association, 2004. Sumner, WA.

20. Capital Press Agricultural Newspaper, Salem, OR.

First posted: December, 2004.