Sample Financials

Current Financial Position
We have built up about $75,000 in savings (including a small inheritance from our grandfather) between us, along with about $50,000 worth of vehicles and equipment. We just finished paying off school loans and have no other debt. Our credit scores are excellent. Our parents are willing to give us a $50,000 unsecured loan at 0% interest to help us get started.

Farm Purchase
For the purchase of the farm property, we plan to use $50,000 of our $75,000 in savings and the $50,000 that our parents have agreed to lend us at 0% interest. The $150,000 balance of the purchase price will be financed through a first mortgage with a 20 year payment term. To be safe we have fixed the interest rate at 5% for this 20 year term.

Liquidity
We will keep the remaining $25,000 in savings for start-up costs and minor repair costs to the barn. Since the CSA members prepay for their CSA shares we do not expect to have any additional borrowing needs, unless we have a major breakdown of their equipment.

Financial Analysis
In support of this business plan and attached below are two items:

  • Financial Statements – Included is a historical financial statement that shows equity of $125,000 that will be invested into this new venture. The second financial shows our equity position after the purchase. While our net worth remains at $125,000, our leverage increases dramatically to 38%. The third financial statement shows us at the end of the first year. While we expect to make a profit in the first year, this profit will not be adequate to service debt, meet living needs and pay for some equipment replacements. This financial statement is considered our “worst case” financial position and shows our net worth decline to $104,500 and net worth position fall to 35%.
  • Projected Earnings – We have provided a three year projection of our business. Included also are notes for nine items on this projection. This projection shows rapidly growing total income and net farm income. While we expect a cash flow shortfall in year one, we anticipate a slight excess of $2,000 in year two, which will grow to $27,000 in year three as the CSA grows.

Capital Spending
In addition to the farm purchase we have budgeted $10,000 annually for capital replacements. However, other than barn improvements, which will be primarily “sweat equity” and modest out of pocket costs, we do not have any specific capital purchases as our equipment, while old is well maintained and in good condition.

SWOT Analysis
We consider the projected earnings to be close to a “worst case” as we are already approaching our first year estimated CSA membership goal. Also, if we get more CSA members the majority of the revenue from additional CSA members goes directly to the “bottom line” as most operating costs are already covered.

Risk Assessment
Our biggest risk is weather. We will purchase crop insurance, but it will not cover all crops. We are hedging against the weather in that we will have 40 different crops that span the whole season. We also have adverse weather condition language written into the CSA contracts so that our CSA members are aware that we can control crop growing but we can’t control the weather. If certain crops are washed out we will try to make it up on crops that exceed expectations.

Contingency Plan
Our other hedge is our parent’s farm and their “support”. While they have not verbally committed to additional financial help, they have agreed to let Jon continue to live there with no rent cost (he does alot of work on the home farm so this is also reasonable). There are some crops that dad raises that we may be able to buy at cost, which we may be able to use to supplement our CSA offerings, if needed.

Our final hedge is our college educations. Either of us could get at least a part-time job to provide financial support for this effort.

Our “optimistic goal” is to achieve year two results in year one and year three results in year two and anticipate being able to do so.

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