Financial Planning for Small Businesses

1
Financial Planning for Small Businesses

• Paul Ellinger
• pellinge_at_uiuc.edu
• University of IllinoisApril 1, 2008

2
Outline

• Background Illinois Farm Beginnings
• Overview of FAST Tools
• Business Plan Economics of the business
• FAST Tool New Company Simulator

3
Illinois Farm Beginnings

• Farmer Training Program initiated in Minnesota
• Illinois Farm Beginnings is facilitated by
• University of Illinois (Leslie Cooperband),
• University of Illinois Extension (Deborah
  Cavanaugh-Grant)
• Two non-profit organizations
• The Land ConnectionCongerville, IL,
• Angelic Organics CSA Learning CenterCaledonia,
  IL
• http//illinoisfarmbeginnings.org/

4
Illinois Farm Beginnings

• 10 sessions in the winter focusing on planning
  for profit
• Hands-on Field Days April to October
• Mentoring from existing farmers

5
Sessions

• Session 1 Clarifying values Setting personal
  and Strategic Business Goals
• Session 2 Building Your Business Plan
• Session 3 Whole Farm Business Strategy Tools and
  Techniques
• Session 4 Financial Planning 101 The
  Fundamentals
• Session 5 Financial Planning 201 Planning for
  Profit
• Session 6 Marketing 101 The Fundamentals
• Session 7 Marketing 201 Realities from the
  Field
• Session 8 Connecting with Financial Resources
  and Farm Business Plan Presentations
• Session 9 Connecting with Conservation Resources
  and Farm Business Plan Presentations
• Session 10 Mentor/Mentee Meeting

6
Session Outline

• Understanding the economics of your business
• Identify the major revenue sources of the
  business
• Develop a method to determine the costs of
  producing/preparing for sale each item
• Variable costs vs fixed costs
• Distinguish your one-time costs from ongoing
  costs
• Identify vulnerabilities
• Oops and double oops assumptions
• Develop a break even price and/or production
  level
• Financial statement primer
• What does your lender want?
• Tools and information

7
FAST Tools

• farmdoc companion project initiated in 1999
• Development of spreadsheet-based tools to aid
  decisions for producers, lenders, consultants and
  investors
• Facilitate use, access, distribution of tools and
  resources through CD and internet distribution
• Quarterly subscription
• farmdoc download
• via workshops
• Approximately 30,000 CDs produced and another
  35,000 downloads
• Increased demand for education and training

8
FAST Tools - Overview
9
New Company Simulator

• Key components
• Five year financial plan
• Cash Flow Monthly cash flow to account for
  seasonality
• Balance Sheet
• Income Statement
• Financial ratios
• Ability to evaluate 6 alternative
  crops/enterprises
• Simultaneously evaluate 3 economic scenarios
• Break even analysis
• Solver for initial capital needed under
  alternative conditions

10
FAST Spreadsheets

• Demo of program
• www.farmdoc.uiuc.edu/fasttools/