You today
The season comes, you buy the input and you produce. The year’s decisions get made one at a time, on the fly, with no plan tying them together. In the end you find out you sold at the worst moment because a bill came due and you needed the cash, or that machinery ran short right in the window, or that two obligations landed in the same cash-dry month. It was not for lack of work. It was for lack of a plan.
Why this step exists
Planning is deciding the whole year on paper before deciding in the field, while there is still time to change at no cost. Changing your mind on paper is free; changing it after you have bought the input or missed the window is expensive. The plan is where you make cheap mistakes.
Research connects this step to performance more than almost any other. In a study of 862 English farms of cereals, dairy, and livestock, formal business planning was one of the few practices linked to financial performance. The link does not prove cause, and this step promises nothing. But planning is, alongside comparing against benchmarks (Step 6), one of the two things research most connects to those who do well.
Plan against your goal
The plan does not exist in a vacuum: it serves the goal you stated in Step 0. The same cost per unit turns into different plans depending on what you want. Someone who put “sleep easy” at the top plans with more cash cushion and sells earlier to lock it in; someone who put “grow” accepts more risk to invest. Before you build the plan, reread your SMART target, because it is what decides which plan is right for you. A plan that does not serve your goal is technically correct and personally wrong.
What the plan holds
Write, before the first purchase of the cycle:
- What to produce and where. The crops and areas, or the lots and classes of animals, with the amount you expect from each and the price you are using as your assumption.
- Labor and machinery by window. How much labor and how much machinery each operation will demand in each time window, so you do not discover the shortfall on the day.
- How much has to be sold, and when. The minimum volume that has to be committed to cover each bill that comes due, month by month, so you are never forced into a panic sale.
- The documents of the year. What expires or needs renewal, with the date. And if someone requires documents of you (a buyer, a bank, a certifier), build your requirements matrix here: a list of what each one asks for, the deadline of each requirement, and the document or record that satisfies it. It is what takes the document demand out of the last-minute scramble and puts it on the calendar.
- The bad-year test. Run the plan’s numbers again under a scenario of low price and low output that you define. If the plan only closes in a good year, it is not a plan, it is a bet.
How to
Start from the number in Step 2, the cost per unit, and build the next cycle’s budget on top of it, not on top of a guess. With the cost in hand, you know which price covers the bill and how much you need to sell for each due date. Write the whole plan before the first input purchase, because after the purchase the decisions have already begun to be made without you. And last, run the plan through the bad-year test before you call it done.
Why keep at it
The plan has a short window of value: it has to exist before the first purchase, and a plan written after the cycle has started is just a report of what was already decided. The discipline here is one of the calendar: setting aside, every year, a few days before the buying season to sit down and make the plan. If you do not set that time aside, you end up planning on the fly, which is the same as not planning.
Common mistakes, and how to avoid them
- Planning in your head. A plan that is not written ties nothing together and vanishes at the first emergency. Write it.
- Planning only the good case. The bad year comes. Test the plan against it first.
- Planning without the cost per unit. Without the Step 2 number, the plan is a guess. Start from it.
- Ignoring the calendar of due dates. A plan that does not look at when the money has to come in leads to the panic sale. Match each due date to a source of payment.
- Planning against the wrong goal. A growth plan for someone who wanted breathing room is skill wasted. Reread your goal first.
Where to start
Before the next buying season, sit down with last cycle’s cost per unit and build, on a single sheet, the budget for the next one: what to produce, at what cost, at what price it closes, and how much you need to sell to cover each month. Then run the bad-year test. Close it before you buy the first input.
Done when
There is, before the first purchase, a written plan for the next cycle: what to produce and where, labor and machinery by window, how much to sell for each due date, the year’s documents (and the requirements matrix, if someone demands paper of you), and the bad-year test done. And the plan serves the goal you set in Step 0.
What this step does not cover
The plan organizes your decisions; it does not recommend what to renegotiate with the bank or which contract to sign, which calls for your case to be reviewed by a qualified professional. And the technique of each operation (what to apply, when, how much) stays with the agronomist or the vet; here you decide the frame of the year, not the recipe for each crop or each lot.