1. Chapter 5 Planning and Organizing an Agribusiness

2. Importance of Small Business Most Agribusinesses are small businesses Small Business Administration = business that is independently operated, is not dominant in its field, and meets certain size standards in terms of employees and annual receipts 90% of nations new private sector jobs are SB 2/3 of all new jobs are companies having < 25jobs

3. Importance 25.4 million full and part-time home-based businesses 97% of nonfarm businesses are considered small by SBA Accounted for more than 40% GDP Greater than population of Australia and Canada 80% of Americans work at SB first Women own nearly half of SB Minority-owned businesses increased 64% 1962-1987 Small companies produce 90% of new jobs

4. Is entrepreneurship for me? Right to own your own business and make profit Big risks so not everyone qualifies Requires Vision Diligence Persistence Must accept all risks Forming operating

5. What is an entrepreneur? Work for themselves and make all business decisions Income is theirs above financial obligations Can test theories and ideas Set working hours Set prices, determine production levels, control inventory Determine product or service offered as well as quality Solve the problems Hire, train, fire Set company policy

6. Characteristics Independent Self-confident Energetic Organized Visionary Persistent Optimistic Committed Problem solver Self-nurturing Risk taker Action oriented Sense of urgency Flexible Emotionally stable

7. Challenges Total Responsibility Manage workers Manufacturing Shipping Find/keep customers – marketing Sell product Meet orders Hours Long Irregular Work more hours than if for someone else Commonly >60 per week Often work weekends and holidays

8. Financial Risks Most serious disadvantage Pay bills Wages Lenders reluctant to loan 50% chance of making it 4 years 40% of manufacturing or wholesale fails >50% of retail businesses fail < 4 years

9. Why Agribusinesses Fail Management Labor Financial Resources Poor recordkeeping Inadequate management information systems Unable to control costs identify or correct problems, and recognize profit opportunities

10. Management People do not plan to fail, they fail to plan. If the business does not work on paper it will not work in real world. Pitfalls Jump in too big Too much credit Freely rapidly Time to build a market Experience Too much business too little capital No emergency fund Business cycles Marketing Nonproductive and nonprofitable activities Unnecessary capital expenses Underprice or overpriced

11. Labor Must hire dependable and qualified employees Family can help but also result in failure Debt, pride, and sense of obligation prevents making necessary decisions Entrepreneurs must work hard

12. Financial Resources Ongoing comparison Income vs out go Plans vs performance Pitfalls Too little capital at start up Too much capital but careless Borrowing money with no plan Inaccurate records Personal extravagance “keeping up with the Jones’” Taxes, insurance other business costs Depending on collateral Improper loan to repayment ability Failure to control living expenses Withdrawing more than what the business actually makes

13. Undercapitalization Inadequate start-up capital Borrowing money on a whim No plan of repayment No emergency fund

14. Marketing Plan and CDC