How to Write a Business Plan for Agricultural Projects to Secure Funding

How to Write a Business Plan for Agricultural Projects to Secure Funding
Agribusiness

Deyana Mincheva

Sustainable Agriculture Advocate

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In the realm of agriculture, a robust business plan is essential for securing the necessary funding to bring your agricultural project to fruition. Whether you’re aiming to modernize farming practices, introduce novel technologies, or launch a sustainable agriculture initiative, a well-structured business plan serves as a roadmap for success.

Here’s a comprehensive guide on how to craft a compelling business plan explicitly tailored for agricultural projects, enabling you to unlock funding and drive agricultural innovation forward.

Step 1: Define your business model

A powerful tool that I always recommend to entrepreneurs is the Business Model Canvas, available for free. This simple exercise consists of filling the 11 building blocks of the canvas. The order I would recommend is:

Value Proposition: What products or services do you plan to offer? How do they differentiate or improve upon those of competitors?

Customer Segments: Which groups of people or companies are willing to pay for your offerings?

Customer Relationships: How will you raise awareness of your products among potential customers? Will you reach out to them directly? Will they discover you via social media or your website? How can they place orders with you? How will they communicate with you after orders are delivered?

Channels: How will you deliver your products or services? Will you handle it internally, or will you require the assistance of a distributor?

Revenue Streams: This is perhaps one of the most crucial questions for a financially viable project. How will you generate income? Will it come from product sales? How often are there value-added services you can offer?

Social & Environmental Benefits: Does your project benefit more than just you and your company? Are you creating new jobs? Are you combating deforestation or participating in reforestation efforts? Are you implementing sustainable agricultural practices?

Key Activities: What tasks must you perform to deliver your value proposition? Will you be cultivating your products? Will you handle processing, storage, packaging, and distribution? Do you require accounting and marketing assistance?

Key Resources: What resources are necessary to carry out your activities, such as land, storage and processing facilities, irrigation, seeds, pest control products, insurance, labor, and machinery?

Partnerships: Who must you collaborate with for your project to succeed?

Cost Structure: How much will your activities and resources cost? What will be your ongoing expenses? What capital expenditures do you need to invest in? What are your project’s associated environmental and societal costs, such as land conversion and water usage?

Completing this exercise independently or, ideally, with your team will prompt you to consider all aspects of your business and provide a solid foundation for developing a business plan.

Step 2: Prepare your financials

Develop realistic financial projections that encompass starting costs, operating expenses, revenue streams, and profitability milestones. Consider factors such as seasonality, market volatility, and production cycles when forecasting sales and cash flow. Provide a breakdown of funding requirements, including capital expenditures, working capital needs, and contingency reserves.

Investors and lenders pay close attention to the financial projections section to assess your business’s economic viability and potential return on investment. Include detailed forecasts of your revenue, expenses, cash flow, and profitability over a specific period, typically three to five years. Base your projections on realistic assumptions and explain any significant variances or assumptions. Although some free templates are available online, such as this one, I would highly recommend getting professional advice on this.

If your business has been running for a while, gather any historical data to highlight your past performance.  

Step 3: Start Writing Your Business Plan

Executive Summary: A good business plan always begins with a one-page executive summary. In the executive summary, you must answer the following key questions: Who are you? What do you do, or what do you intend to do? Why do you think this is a good idea (necessity/market demand/need you are addressing)? What is your timeline (when would you like to start/when do you foresee generating revenues)? What do you need from the person reading it, and how much (Funding for a processing facility? Trade finance? etc.)?

Pro tip: Although the executive summary is the first part of the document, I recommend writing it last.

Introduction: Explain your motivation for starting this project.

Value Proposition: Describe the products or services you plan to offer in detail.

Market Analysis: Keep it concise and to the point. For example, if it is a project about growing onions in the Niari Region of Ghana to be sold in the local market, there is no point in including the global market value and forecast. Rather, it is more interesting to explain who you intend to sell to (your customer segments), what the current trends are (seasonality, availability), what the prices are for similar products or services, and how you would position your products (are you offering premium products for a premium price, or positioning yourself as the cheapest on the market?).

Operational Plan: Provide details about your operational processes, production methods, supply chain management, and resource allocation. Discuss your organizational structure, key personnel, and operational milestones. Investors want to see that you have a clear plan for executing your business strategy and delivering on your promises.

Key Resources: What are your key resources? What do you currently have (i.e., land, machines, storage), and what would you need in the future?

Financial Information: Include a comprehensive summary of your financials and financial projections.

Management Team: Introduce your management team, highlighting their relevant experience, skills, and qualifications. Investors place significant emphasis on the strength and capabilities of the management team, as they play a critical role in the business’s success. Showcase your team members’ expertise and track record to instill confidence in investors.

Social and Environmental Impact: What social and environmental value is your business creating?

Pro tip: Is there something about your business that aligns with the sustainability goals of your potential lender (i.e., if you are applying for a grant through a government program, are the program objectives to contribute to food security, create employment for youth and women, increase mechanization)?

Risk Analysis and Mitigation: Identify potential risks and challenges that could impact your business’s success, such as market competition, regulatory changes, operational risks, social and environmental risks, or financial constraints. Discuss your strategies for mitigating these risks and contingency plans for addressing unforeseen events. Investors appreciate transparency and proactive risk management strategies.

Appendices: Include any supplementary materials or supporting documentation, such as resumes of key team members, market research reports, financial statements, legal documents, soil analysis, yield assumptions, and historical data. While not always necessary, appendices provide additional context and credibility to your business plan.

Contact Information: Always include a page with your contact details. Sometimes, your business plan can be circulated to other interested parties, and it would be a shame if they couldn’t contact you!

Conclusion:

Writing a business plan can be hard work and feel overwhelming initially, but it is essential for accessing the necessary funding.

You can consider various other approaches and structures for your business plan. No matter your choice, I recommend breaking it down into simple steps. Feel free to seek assistance in areas where you need clarification. I’m happy to try to help, and numerous consultants and non-profit organizations are willing to lend support!

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