Running Head: GRAIN FARMING 1. Grain Farming Operation Business Research Project. Melinda Robertson. Globe University/Minnesota School of Business

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1 Running Head: GRAIN FARMING 1 Grain Farming Operation Business Research Project Melinda Robertson Globe University/Minnesota School of Business Author Note: This paper was created for Research and Business Project Development, RS600.XM1.14FALL, Dr. Gregory Coughlin in the Master of Business Administration with Accounting Emphasis on December 18, 2014.

2 BUSINESS PLAN 2 Table of Contents 1. Grain Farming Operation Business Research Project 3 i. Overview 3 ii. Definitions 3 iii. Key Terms 3 iv. Key Players 4 v. Issues to be Examined 4 vi. Methodology 4 vii. Scope 5 viii. Intended Audience 6 ix. Closing Statement 7 2. References 8

3 BUSINESS PLAN 3 Grain Farming Operation Business Research Project Overview The business proposal centers on a grain farming operation research project with the purpose of obtaining approval to begin creating a business plan to form a company in southwestern Minnesota. The grain farming operation will be identical to its local competitors because it will manufacture corn and soybeans for the worldwide market. However, the business will focus on the accrual accounting method to compare costs and revenues to determine how profitable the commodities it manufactures are, unlike most farms that focus on cost accounting. Research will be conducted to assist the business owners in forming a new grain farming operation from scratch and competing in a challenging industry successfully. Cooper (2014) stated that many young farmers need an edge in today s industry just to get started because the industry has become very complex. The farm owner s position is one of the most demanding jobs, both physically and mentally; so, the farmers must have extensive knowledge of the farm operations, as well as, the financial skills to keep the business running (Cooper, 2014). The accrual accounting method, grain production methods, and asset accumulation must all be researched in order to have the basis of successful farm ownership and a business plan. Definitions Key Terms Accrual Accounting: The financial reporting method that recognizes transactions when they occur in real time and not when money or funding is exchanged (Nezlobin, 2012). Agronomist: A person hired to manage field-crop production and soil maintenance to help increase yields, maintain the environment, and create a positive growing atmosphere (Agronomy, 2005).

4 BUSINESS PLAN 4 Key Players JR: Co-owner with over two decades of farm operations experience TR: Co-owner with over a decade of farm operations experience Agronomist: To be determined MR: Accountant/business manager with several years of accrual accounting experience Issues to be Examined As mentioned before, the grain farming operation will be a complex business testing the owners skills in operations and finances. The research project will help the owners determine if the business plan holds a successful future and provides the basic structure for the business plan itself to mature into a formal company. The following are the research topics to be examined: 1. A competitive analysis of the ag industry of southwestern Minnesota 2. A financial analysis of the ag industry of southwestern Minnesota 3. The legal and regulatory requirements of a grain farm operation 4. The grain farming operations, specifically: land management, crop production techniques, and funding for asset accumulation 5. Environmental and ethical concerns related to the grain farming operations in the surrounding area 6. The accrual accounting financial reporting method and how it applies to grain farming operations nationwide Methodology The research design of the project centers mainly on causal research in regards to the accrual accounting method chosen for the grain farming operation because the researcher already has a firm understanding of this procedure and its characteristics through prior knowledge and

5 BUSINESS PLAN 5 experience. Zikmund, Babin, Carr, and Griffin (2013) defined casual research as the study that looks where the cause and effect relationships are formed. Exploratory research, the first stage of the research process, will be conducted with the operations side of the farming business to decide upon labor, asset accumulations, and grain production. The research methodology chosen mirrors the research conducted by Barbieri (2013) in her agritourism study where she used a combination approach of case studies and conducted comparative analysis on primary and secondary data. The primary data collected in the project will be from agriculture seed, chemical, and machinery vendors to determine asset and production expense costs. Legal fees and tax rate charges will be collected from the primary source of the national and state government systems by consulting their annual tax rate schedules. The United States Department of Agriculture (USDA) and state universities will provide the secondary data sources of surveys, studies, and interviews that summarize information of the financial outlook of the industry, the current competition analysis, and ethical concerns of farmers for the specific southwestern Minnesota locality. The research conducted will be based on qualitative research methods, as many studies may contain biased results or a limited set of data that is unfit to base theories on. A research project and business plan must be made from an educated decision and not an idea grasped out of thin air. Zikmund et al. (2013) stated that qualitative research helps the researcher define the true meanings of the industry and offers new insights to the cause and effect relationships seen in market trends. That insight and knowledge will help create a niche in the market to give the business longevity and security. Scope

6 BUSINESS PLAN 6 The research project will explore all aspects of a business plan of a grain farming operation. Brad (2014) stated that an agricultural company must research four aspects of the business to have a successful plan: the business profile, environment, objectives, and purpose to achieve. The business profile will be researched through a competitive analysis, market analysis, and financial analysis of the industry. The business environment will be researched through the legal and regulatory requirements, ethical concerns, local and global environmental concerns, and source analysis of local product and asset vendors. The objectives of the business will be researched through studying grain farming operations as they apply to land management, crop production techniques, and funding for asset accumulation along with the accrual accounting financial reporting method to give the business a niche in the industry. The business will not look to research or to produce an innovation or technique in farming such as a disruptive new business concept would (Robles, 2015). Instead, it will use the existing accrual accounting framework businesses may use for financial reporting. The project will not research other farming techniques of alternative grains, livestock, agritourism, or direct product to consumer sales ventures, consumer targeting, or advertising as seen in farmers markets. Intended Audience The information contained in the business plan is intended for the investors and lenders of the farming operation. The investors of the business would include colleagues, family, and friends to provide capital for the business operations. The lenders of the company will provide the most funding through Ag business loans. Lenders include Minnwest Bank, Dawson Co-op Credit Union, and Farm Credit Services of America. Grant applications will also be submitted to the Farm Service Agency (FSA) a branch of the USDA through the Beginning Farmers &

7 BUSINESS PLAN 7 Ranchers program that help promote new farming operations through loan, scholarship, and grant funding programs (Farm Service Agency, 2014). The investors of the business (colleagues, family, and friends) have varying levels of education, business ownership experience, and knowledge of finance. The business plan will be written in plain, understandable language to benefit all education levels. The lenders group consisting of the financial institutions and the FSA will all have education no lower than an undergraduate degree, extensive knowledge in business lending practices, and experienced knowledge in finance. The business plan version submitted to this group will emphasize the numbers and statistics behind the business needed to process the loan and grant applications. Closing Statement The business plan will focus on all aspects of a grain farm from operation practices to competitive and financial analyses in order to carry out a successful business venture. The project will focus on the accrual accounting method to better compare costs and revenues in real time to monitor the profitability of the company and to make necessary adaptations to remain competitive in the industry. Grain production methods, asset accumulation, legal requirements, and environmental and ethical concerns will also be researched to ensure the business is meeting all stakeholders expectations. The plan will specifically give investors and lenders the information needed to perform a risk assessment of the company for funding purposes. The approval of the proposal will begin the process of completing the research needed to create a sound business plan.

8 BUSINESS PLAN 8 References Agronomy. (2005). In F. C. Mish (Ed.), Merriam-Webster s Collegiate Dictionary (11 th ed.). Springfield, MA: Merriam-Webster, Incorporated. Barbieri, C. (2013). Assessing the sustainability of agritourism in the US: A comparison between agritourism and other farm entrepreneurial ventures. Journal of Sustainable Tourism, 21(2), doi: / Brad, I. (2014). Business plan -- Major management tools in development of a business. Agricultural Management / Lucrari Stiintifice Seria I, Management Agricol, 16(2), Retrieved from EBSCO Database Cooper, D. (2014, June). The big business of farming. Business in Calgary, 24(6), Retrieved from Farm Service Agency (FSA). (2014, November 7). Beginning farmers and ranchers loan. Farm Loan Programs. Retrieved from Nezlobin, A. (2012). Accrual accounting, informational sufficiency, and equity valuation. Journal of Accounting Research, 50(1), doi: /j x x Robles, E. (2015). How to identify disruptive new businesses. Review of Business & Finance Studies, 6(1), Retrieved from EBSCO Database Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2013). Business research methods (9th ed.) [EBSCO ebook]. Mason, OH.: South-Western Cengage Learning.