Planning & organizing an agribusiness

1. Planning & organizing an agribusiness Chapter 5

2. Objectives~ • Explain the importance of small businesses. • Examine whether entrepreneurship is for you. • Describe the challenges of entrepreneurship. • Describe why agribusinesses fail. • Analyze a potential agribusiness venture. • Prepare a business plan. • Explain the 5 major areas of agribusiness management. • Establish goals for an agribusiness. • Discuss the importance of problem solving and decision making.

3. The american dream… • Be your own boss if you want to be! • Possible for a person to start with very little capital and build a successful business • Very difficult process • Important to understand the basic processes involved in business planning and organizing

4. Importance of small businesses~ • Most agribusinesses are small businesses • Small Business Administration (SBA) defines “small business” as one that is: • independently operated • is not dominant in its field • meets certain size standards • number of employees • annual receipts

5. Really “small”? • Not in the number of people they employ! • 90% of the nation’s new jobs in the private sector are in small businesses • 2/3 of all new jobs are in companies with fewer than 25 employees • Very good chance that you will either work in a small business someday or start one

6. Small business statistics: • 25.4 million full-and part-time home-based businesses in US • 97% of all non-farm businesses considered small by the SBA • Account for more than 40% of GDP • Total number of employees who work in small business is greater than the populations of Australia and Canada combined • First jobs of about 80% of all Americans are in small businesses • Number of women who own small businesses has increased elevenfold since 1960 • Minority-owned businesses increased more than 64% between 1962 and 1987 • Small companies produce 90% of the new jobs

7. Rock and sand… • Small businesses essential to US economy • Fill a jar with sand • No spaces between sand • Fill a jar with rocks • Big spaces between rocks • Small businesses fill in the empty areas • Serve customer needs big businesses can’t!

8. Am I an Entrepreneur? • Work for themselves • Income they earn above financial obligations is theirs to keep • Test their own theories and ideas on how to run a business • Set their own working hours • Set prices, determine production levels, and control inventory • Determine the product or service offered • Solve the problems • Hire, train, and fire employees • Set company policy

9. Entrepreneur characteristics~ • Independent * Self-nurturing • Energetic *Action-Oriented • Self confident * Risk-Taker • Organized * Sense of urgency • Visionary * Flexible • Persistent * Stable • Optimistic * Problem Solver • Committed * Motivated

10. Why agribusinesses fail… • Management • Labor • Financial resources • Undercapitalization

11. Analyzing an agribusiness venture~ • Several start-up factors to consider • What financial resources are needed? • What labor does the agribusiness need? • What management requirement exist? • Does a market exist for the product or service? • Where should the agribusiness be located? • Should you buy an agribusiness or start a new one? • So is it better to buy an existing business?

12. Advantages: • Allows a quicker start • Provides ready-made customers • Eliminates some competition • Reduces cost of getting established • Has a base of financial information estimating costs and profits

13. Disadvantages: • More capital resources needed in beginning • No time to learn while the business is developing • Possibility of misjudging and buying a loser • Problem of having to either accept the location or move the business • Loss of the safety that comes from expanding and growing into a business as resources permit

14. Basic questions: • What resources are needed? • Are these resources available? • What are the costs of the resources? • What level of management is required? • Does the prospective owner have the experience necessary to operate the business?

15. Preparing a business plan~ • Written description of a new business venture • Describes all aspects of the proposed agribusiness • Focuses on: • what you want to do • how you will do it • what you expect to accomplish • Essential for receiving help from potential investors and financial institutions

16. Areas of agribusiness management: • Agribusiness management refers to the responsibility of a person to: • make decisions • organize resources to implement decisions • monitor the implementation of decisions • evaluate the effects of decisions on the overall success of the operation • Agribusiness management has five major areas of activity, as follows

17. 1. planning~ • Determining what is to be done and where, how, and when to do it • Important functions: • Determining the present status of the business • Surveying the environment • Setting objectives • Forecasting future situations • Starting necessary actions and resources • Evaluating proposed actions • Revising plans in response to changing conditions • Communicating effectively

18. 2. organizing • Grouping together activities, people, and other resources to implement a plan • Organizing involves: • Identifying • Breaking • Grouping • Defining • Grouping positions • Assigning work to be performed • Revising and adjusting • Communicating duties

19. 3. DIRECTING • Providing instruction and guidance to employees • Concerned with the relationship between managers/leaders and employees • Involves: • Communicating and explaining objectives to employees • Setting standards for performance • Providing motivation • Coaching employees • Rewarding employees • Praising and criticizing constructively and fairly • Communicating throughout all processes

20. 4. staffing • Includes all activities involved in the recruitment, selection, training, and retention of personnel • Hiring staff is the principal job of any leader • Involves: • Determining human resource needs • Recruiting excellent employee candidates • Selecting excellent employees from those recruited • Training and developing employees • Revising the number of employees according to changing conditions of the agribusiness

21. 5. controlling • Covers all the activities that are necessary to ensure that the policies of the agribusiness are being carried out • Involves: • Establishing standards (achievement, performance, quality, etc.) • Monitoring results and comparing them to standards • Correcting deviations from standards • Revising and adjusting methods in response to changes the agribusiness experiences, on an ongoing basis • Communicating necessary changes throughout the organization

22. Goal setting~ • People do not plan to fail • They fail to plan • Prior planning prevents poor performance! • Rules for setting goals: • Write down your goals • Organize your goals • Arrange your goals according to these three groups: immediate, short term, and long term

23. Types of goals~ • Immediate • accomplish within a day, a week, or a month or two • Short-term • accomplish in a year or two • Long-term • intend to work toward for many years • give you an idea of where you want your business to be several years from now

24. Reaching your goals~ • Manage your time • Avoid procrastinating • Judge your time • Schedule your time • Establish priorities • Break goals into manageable units

25. Problem solving / decision making • Numerous decisions to make and problems to solve when starting an agribusiness • Decision making is the term that describes the process used to choose the new and different action • May involve setting new goals to solve a problem • In extreme cases, when a problem cannot be readily solved, the decision may actually be to do nothing at all • Page 117

26. 3 styles of decision making • Reflexive- • make decisions quickly • Reflective- • consider all options and consequences before making a decision • Consistent- • consider all options and still make decisions in a timely manner

27. Important steps: • Systematic approach to problem solving can be of great benefit • Steps are similar to the seven steps of the scientific method • Recognize the problem • Determine your alternatives • Gather information • Evaluate the alternatives • Select a workable solution • Carry out your solutions • Evaluate your results