The feasibility study is usually done prior to doing a business plan. It is designed to explore the viability of changes to your current farm business. These changes could include - but are not limited to - expansion, modernization of existing facilities, or changes to one enterprise within the business.
The first step is to determine your personal and/or family goals. Then changes to the business that are in line with your personal goals can be explored in the feasibility process.
The feasibility study explores the financial outcome of a project. It allows you to explore multiple options for changing your business. It is much easier (and less expensive) to change your mind on paper rather than after the concrete is poured and the heifers are purchased. The study includes the following components.
Defines your existing business and facilities and explains the proposed plan.
Capital Purchase Budgets
Includes a summary of planned capital expenditures for the proposed project and detailed budgets for each of the summary categories.
Source and Use of Funds
Develops how existing liabilities and new funds are to be structured including proposed interest rates and amortization periods.
Financial Guidelines Summary
Provides a one-page summary of the projected financial performance ratios resulting from implementing the proposed plan on your farm. This section will help you understand how the proposed changes are a good business decision.
Analysis of the Business for Preceding Year
Provides a summary view of your business's financial performance for the previous year.
Analysis of Proposed Changes
This section includes the detailed cash flow that results after the changes to the business have been implemented. These cash flow projections estimate the performance of the business after it has reached steady state (year three).
Details all existing assets and liabilities of your business.
Designed to support proposed plan. Content varies depending upon the project. May include projected animal purchase needs (cow flow), projected feed needs, projected labor requirements and milk production history.
While the Farm Center's financial analyst cannot do a complete feasibility study, he can help you put together some of the financial pieces to do the study.