2-years Pre-plant · Developing a Business Plan
Developing a business plan is not as difficult as you would think and it provides an excellent venue to do some critical thinking about the why's and how's of you getting into the business of growing grapes. To get you started here are some of the major sections that are found in a typical business plan:
- Tell the story of your business, the land, labor and capital behind the scenes. This is an opportunity to market the business to investors or lenders.
- In one page describe the keys to your success and what differentiates your business from the competition. Be as persuasive as possible.
- Even if you are not looking for investors or financing, this executive summary will be helpful to continually remind you of your objectives, mission and keys to success. As a small company you'll need to remain focused, a written reminder to you and your employees can be very helpful.
Company Summary
Start-up Summary
Include a short paragraph to explain your start-up strategy and potential challenges or barriers to success that are particularly challenging to starting a vineyard or winery. For most operations, capital investment and cash flow present the greatest challenges.
Identify all start-up funding that is available; separately include all financing you are seeking that is potentially available. Also, identify all anticipated expenses and investments that will occur during the start-up phase. The start-up phase is one year or whenever revenue is received, whichever period is longer.
Company Locations and Facilities
Site selection is key to a successful vineyard operation or winery. To have both requires a unique combination of characteristics. Highlight the characteristics of your land, or the requirements of land you intend to purchase. Having a site that meets the requirements of your objectives will make marketing and operations easier and success far more likely.
Products and Services
Describe your core products in a narrative. Use the narrative to describe the expected value of products. Also include the volume your business will handle. If your price expectations are different than market rates, explain why. Will you be able to operate more efficiently and sell products at a lower cost? Will your business add value to a product that others do not add?
Competitive Comparison
Assess the industry; seek advice from county resources and government provided statistics. The core of the grape industry is highly competitive. A value added product, such as wine, offers an opportunity for differentiation, this can be the most effective way of coping in a highly competitive industry. Producers face stiff competition from established growers that operate with low margins. If you are interested in vineyards, provide details on a strategy. Innovation and size are the most common ways of overcoming competition and operating more efficiently than average.
The Market
Wineries and vineyards both have a certain nostalgia and romanticism associated with them. It is important to put those feelings aside when writing your business plan.
Take some time to understand the market, both on a local and a national level. Use this section to articulate your understanding of the market. First and foremost a vineyard or winery is a business operation. Without a comprehensive understanding of market conditions, your business strategy and financial plan cannot be verified as sound.
Strategy and Implementation
With the information highlighted in your market analysis, highlight how you'll fit into that market.
To begin, what is your competitive edge? In this industry you'll have to have one. Just being established is a great advantage that the competition has. You'll have to overcome that advantage by doing something differently. For a winery a, truly unique idea that resonates with the consumer will greatly increase the likelihood of a successful outcome.
Next, what is your marketing strategy? It is not necessary to describe all of the marketing programs you plan to participate in. Rather, formulate an overall strategy. This will allow you to filter through individual marketing programs and reject those that don't fit an overall strategy.
Finally, complete a sales forecast. Include a breakdown of different products. Estimate both volume and prices conservatively. A conservative estimate will give you flexibility in the event of crop disasters or market variability.
Management Summary
The management summary should clearly define roles of personnel. By clearly defining roles and dedicating some thought to the management structure and personnel plan.
The management summary is most important when a number of players fill key roles in the business. The summary should contain ownership information, payroll plans and key responsibilities for the management team.
Financial Plan
Complete a comprehensive and realistic financial plan. The financial plan should contain a break-even analysis. It should also create a forecasted profit and loss. Break down the profit and loss by year for the first five years.
Create a plan for cash flow, too. Totaling and tracking an expense plan is essential to keeping the business grounded in reality. During the start-up process bank accounts should be very large. Make sure you remain conservative and do not run into cash flow problems. For vineyards a negative cash flow should be anticipated for a minimum of three years. For wineries, the range of negative cash flow depends on your investments. Realistically, it could range between two and six years for a successful winery.
Resources
Penn State Ag Alternatives - Developing a Business Plan
Developing a Business Plan - Virtual Advisory.com - While not directed toward agriculture, this site does an excellent job of asking the questions needed to allow you to critically think about starting your vineyard as a business.
US Small Business Administration - useful in developing and implementing your business plan.
Business Plan Workshop - an on-line course (takes about 30 minutes) at the U.S. Small Business Administration web site. After taking a short survey you will be directed to the on-line course.
Starting or diversifying an Agricultural Business - This is a good basic resource that will help walk you through the steps involved in developing a new business as well as information on the various types of Business Organizational Structures.
Financing Small-scale and Part-time Farms - Once you have your business plan in place you can start to look for funding using these resources to help guide you.
Content by:
Kevin Martin
Business Management Specialist
Lake Erie Regional Grape Program