entrepreneur workshop i 5 february 2013. let the planning commence… “business planning is a...
TRANSCRIPT
Entrepreneur Workshop I
5 February 2013
Let the planning commence…“Business planning is a critical component toany operation. Even though a ‘seat-of-the-pants’approach to farming might work, it takes toolong to figure out if a decision is a poor one; youcan waste years doing the wrong thing when youcould have been doing the right thing.”
—Greg Reynolds, Riverbend Farm owner/operator.
Agenda
Introductions Economics 101 Overview of Legal Business Structures Your Strengths Pairing your Strengths with an
Agribusiness model Homework
But first, we have to review some economics.
Price of
Cone
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Equilibriumquantity
Equilibrium price Equilibrium
Supply
Demand
$2.00
A market is a group of buyers and sellers of a particular good or service.
The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets.
Markets and competition
Markets and competition
Buyers determine demand.
Sellers determine supply. A competitive market is a market in which there
are many buyers and sellers so that each has a negligible impact on the market price.
Key principles of economics
How people make decisions. People face tradeoffs. The cost of something is what you give up
to get it. Rational people think at the margin. People respond to incentives.
Wait, why, again this detail on economics?
Key principles of economics
How people interact with each other. Trade can make everyone better off. Markets are usually a good way to organize
economic activity. Governments can sometimes improve
economic outcomes.
Key principles of economics #1: Efficiency v. Equity
Efficiency means society gets the most that it can from its scarce resources.
Equity means the benefits of those resources are distributed fairly among the members of society.
Key principles of economics
Decisions require comparing costs and benefits of alternatives. Whether to go to college or to work? Whether to study or go out on a date? Whether to go to class or sleep in?
The opportunity cost of an item is what you give up to obtain that item.
Key principles of economics.
Marginal changes in costs or benefits motivate people to respond.
The decision to choose one alternative over another occurs when that alternative’s marginal benefits exceed its marginal costs!
That is, people respond to incentives!
Principle #7: Governments Can Sometimes Improve Market Outcomes. Market failure occurs when the market
fails to allocate resources efficiently. When the market fails (breaks down)
government can intervene to promote efficiency and equity.
Market failure may be caused by an externality, which is the impact of one
person or firm’s actions on the well-being of a bystander.
market power, which is the ability of a single person or firm to unduly influence market prices.
Key principles of economics.
3BL
Economics 101 Summary
When individuals make decisions, they face tradeoffs among alternative goals.
The cost of any action is measured in terms of foregone opportunities.
Rational people make decisions by comparing marginal costs and marginal benefits.
People change their behavior in response to the incentives they face.
Economics 101 Summary, cont. Trade can be mutually beneficial. Government can potentially improve
market outcomes if there is some market failure or if the market outcome is inequitable.
Types of Legal Business Structures Sole Proprietorship Partnership S-Corporation Limited Liability Company
Need more information? Go to www.wvsos.com
See: Legal Forms of Organization, SBDC Resource
How do you choose?
Consider the following: Protection of personal assets
Do you have any? What are they? Formality of existence (record keeping) Number of owners Liability of owners Taxation of entity profits Compensation of owners Transferability of ownership interest
What’s the deal with liability and ag?
Product
Liability
Premise
LiabilityCrop
Insurance
Sole Proprietorship
Easiest legal structure to adopt and the most
common form
For agriculture related businesses:
Cost of Business License = $0
Cost of Registration Fees = $0
Unlimited risk of losses for owner and no
protection for owner’s financial resources.
Limited Liability Company
Recommended legal structure to adopt for
agriculture related businesses
For agriculture related businesses:
Cost of Business License = $0
Cost of Registration Fees = $130
Limited liability for owners.
So, how do I get a business license. Keep that thought for the May
Entrepreneur workshop.
Business Development Resources
Charleston Area AllianceGROW
http://bit.ly/VNsvyysromano@charlestonareaallian
ce.org
WV Small Business Development Center
http://[email protected]
Sustainable Agriculture Research & Education (SARE)
http://www.sare.org/Learning-Center/Topics/Economic-Marketing
eXtension?
And then, know yourself.
1. Know yourself, take this abbreviated Myers-Briggs Test.
2. What does it mean?3. Let’s hear it. Divide and Conquer.
Translation to Agribusiness?
With this newfound knowledge, complete Worksheet 1 “Self-
assessment”
What do you value in your agri-business?
To me, being “successful” in farming means:• Paying down our expenses.• Putting money away for the future.• Farming full time.• Taking pride in the products we produce.• Creating a place for the next generation to farm.• Taking time to rest, vacation.• Being able to save for down times.• Having a surplus to share with others in need.• Working together as a family.• Helping neighbors who are farming.• Creating a beautiful landscape and environment.• Working outdoors with livestock.• Generating ____ % of my income from the farm.
Or, in the context of 3BL:
• What type of life do Iwant to lead? (personal)• What do I considerfinancially important?(economic)• What role does theenvironment play in mylife? (environmental)• How do I definecommunity and why isit important?(community)
Complete Worksheet 1.1 “My Values”
Agribusiness Models
More andmore, we are moving toward a
“new agriculture” where farmers sell differentiated
products and are in direct contact with their customers.
Review of agri-business models
DIRECT MARKETS
Farmers’ MarketsCommunity Supported Agriculture
Agritourism
INTERMEDIATE MARKETS
Restaurants and grocery stores
Institutional Food Service
Brokers & Distributors
Hospitals
Schools
Or, don’t forget about the power of innovation…
Collaborative Models
Co-op SAGE Broker? ?
So, why are you developing a b. plan?
With this newfound knowledge, complete Worksheet 1 “Self-
assessment”
Homework
Decide on legal structure Read through agriculture models Take note of sustainable, local food
purchasing options – create a log. (craft google doc)
Next Entrepreneur Workshop Tuesday, March 5, 5:30-7pm
Topics to be covered: Understanding your Market Meet and network with your end-markets