Strategic Business Planning Case Study –Pierce’s Creek Road Farm
The Pierce’s Ck Road Farm occupies 65 hectares and is located approximately 10 km N of the town of Crows Nest, SEQ. The farm has a history of cattle grazing, irrigation-based dairy farming, and native cut flower production. It was purchased several years ago from a deceased estate, in neglected condition, and the intention of the new owner is to develop it into a property that retains high lifestyle values but is self-supporting through establishment of one or more profitable enterprises. Its main use now is low intensity beef cattle grazing, either of agisted stock owned by a neighbor or of steers purchased for fattening and resale.
The property was formerly located in the Crows Nest Shire, but since recent local government amalgamations has been part of Toowoomba Regional Council. The area sits on the Great Dividing Range, mostly on the eastern fall, and Pierces Creek which drains this property flows east and eventually into the Brisbane River. The catchments for Toowoomba’s main water supplies lie just to the south of Crows Nest.
The area has a complex underlying geology with highly variable associated soils types. This property probably has areas of soils based respectively on granite and basalt (igneous rocks), sedimentary and metamorphic rocks. There are areas of fertile alluviums on gully floors, and some hill side soils have been found suitable for cultivation and irrigation. A large dam was formerly used to support a significant area of irrigated forage crops and pastures for dairy production, but was destroyed in the 2011 floods. It is planned to restore this dam as part of future developments. There is also access to limited but reliable underground water that was used for the cut flower enterprises, and with some attention to infrastructure, this venture could be revitalized.
You are a rural management consultant whose services have been secured by the investor to prepare a strategic business plan for this farm. She has indicated that funds up to $0.5million may be available from salesof other assets for developing the propertyto a viable economic state. The owner would also be prepared to borrow a further $250,000 if convinced of the viability of the venture(s) proposed, compatible with the intention the property becomes a showcase of innovative and environmentally sustainable agricultural productivity. She is open to all constructive ideas, whether of proven existing enterprises or of some truly novel concepts, or a combination of both. There is a firm requirement that in addition to being demonstrably environmentally friendly, this total investment be capable of returning an internal rate of return of 10% or better, over a 15 year time frame, so analyses need to be rigorous enough to support investment decisions. This means that any investment in new infrastructure should lead within reasonable time to both enhanced value of the property as an investment, cashflow positivity and economic profitability.
You should consult various business planning guideline examples before selecting one to use, or adapting your own format. Use smart and Safe for analysis of the current situation and evaluation of proposed developments. The SMART acronym provides a mnemonic for system analysis, and the SAFE acronym links to a robust approach to evaluation of proposed changes.
Your aim is to produce a Strategic Business Plan in a suitable format, which can guide the development of the property over the next 3-5 years, and set the stage for its profitable operation thereafter. Assessment will be based on the extent to which you demonstrate:
• creativity in developing a plan that identifies and responds to contextual issues and drivers of change confronting agriculture in general and in the Toowoomba and South east Queensland region
• identification and understanding of the technical bases of enterprises you propose;
• knowledge of business principles and their application to this case;
• capacity for research and depth and accuracy of analysis;
• identification and application of appropriate planning techniques;
• ability to interpret analyses in developing relevant and useful findings and recommendations;
• a high standard of presentation, as would be expected from a professional consultant;
• inclusion of appropriate planning techniques, such as gross margin analysis, partial budgeting, cash flow and discounted cash flow analysis, to carefully appraise at least one proposal that is currently being contemplated, planned or implemented by the owners, or that you have identified as worthy of consideration, in order to improve the long-term sustainability of the business.