Tag Archives: business

The Three Secrets for Increasing Profits

Farmers and Ranchers seldom spend time WOTB, but now that it is too hot outside to be working in the business (WITB)  cutting trees, spraying brush, etc, now it’s time to sit back and listen to David Pratt, owner of Ranch Management Consultants, and the dvd i just received entitled, “The Three Secrets for Increasing Profits” and begin WOTB.  (Working On the Business).

Happy 4th of July!!!  be safe out there!

Cheers

tauna

“If our farms are not fun, not profitable, or are too much work, our children won’t want them…. Romancing the next generation is the ultimate test of sustainability.” Joel Salatin, Polyface Farms

Keeping Records

Yeah, i’ve harped before about keeping good records and tracking expenditures and income, but when i hear the same people complain about having no money to pay bills, yet when asked if they keep records, they say ‘no,’ it causes me to wonder if they just want to complain, don’t have any idea of where their money is being spent, or perhaps don’t want to know.  But, like anything, if one doesn’t make improvements, then you’ll always be able to complain about something and that is stressful.

Here’s a short article i stumbled upon.  “Make a Personal Budget and Keep Track of Spending

It’s imperative and so easy to keep track of expenses.  Most can simply use a notebook and pencil.  Even easier is to have a calculator in the mix. (Coffee optional)  Write down the amount or ask for a receipt when you stop by the coffeeshop for a latte.  Picking up a soda from a vending machine – well, you’ll have to write it down.  Whatever you need to do, keep track of even the smallest expenditure and categorise it.  THEN, you can make decisions to change and improve your financial situations.  Reimburse your cash expenditures by writing a check to maintain your petty cash stash.  Sure, you can take cash out of your paycheck each month, but it makes it more real when you have to write a check.  Keep your petty cash in balance.

This can be applied to businesses as well, but managing one’s household and personal expenses is the first step.  Personal finance record keeping should begin in the preteen years – as soon as you earn or spend money.

Cheers!

tauna

WOTB

The WOTB Test

Most people blame things beyond our control like the weather, government regulation, low commodity prices and increasing costs for their failure to make a healthy profit. These are the things most often discussed at producer meetings and in the coffee shop. These are also things we can do little about. Making them the scapegoats for poor performance makes it easy to absolve ourselves of responsibility. But if prices, costs, weather and regulation really determine profit or loss, why do some businesses survive, even thrive, in these conditions while others fail? Depressed markets are a crisis for some but a profitable opportunity for others. It is not the situation, but the decisions we make that determine success or failure.

According to the US Small Business Administration, most new businesses fail. Fewer than 10% survive to see their 10th year. In his best-selling book, The E-myth Revisited, Michael Gerber points to an exception. He says that 97% of new franchises survive beyond 10 years. Why the difference? Simply put, franchises have a clear-cut blueprint on how to run a business. McDonalds doesn’t succeed because they make the best hamburgers or because they hire the smartest, talented people to work behind the counter. Over the years they have achieved economies of scale and have a lot of clout when it comes to negotiating lower costs with their suppliers. But they wouldn’t have been in the position to do that if they hadn’t built a business that actually works. They didn’t grow first and then figure it out. They figured it out and then they grew.

As Gerber puts it, they worked on the business (WOTB) to build a business that actually works. We are so busy working in the businesses (WITB) doing $10/hour jobs that we often don’t ever get around to working on our businesses (the $100/hour work). This is the work that determines the winners and the losers in any business…including yours. More than genetics, prices, weather or any other factor, it is this issue that separates the men (and women) from the boys
(and girls) in ranching.

Our ranches suffer economically, financially and ecologically when WOTB takes a back seat to WITB. Our failure to effectively work on our businesses is the single biggest reason that most ranches aren’t profitable and that most ranches don’t survive generational succession with their land or family intact.

It doesn’t have to be this way. Ranching can make a healthy profit, thrive ecologically, stay in the family indefinitely and be the stimulus for revitalizing rural communities. You put your ranch on the path to achieve these results when you put the shovel down and pick up the pencil … when you start working on it, not just in it.

I’ve heard some complain that they don’t like working on their business. I wonder if the real problem is that they don’t know how to work on it. Previous generations may have been able to get by without WOTB when land values were cheaper and their ranch had only been split once by a generational transfer. But times and conditions have changed. What passed for management then, doesn’t pass muster now.

Score yourself to see how effectively you are working on your business:

Scoring:  0 = I have not addressed this issue
5 = I have addressed the issue but have more work to do
10 = This describes my business.

ARE-YOU-WORKING-ON-YOUR-BUSINESS-chart-1

If you scored more than 70, congratulations! You probably have a healthy business with a promising future. If you scored 40 to 70, you’ll be feeling the pinch but will probably continue to get by with off-farm income subsidizing the place … at least until it comes time to pass the ranch on to the next generation. If you scored less than 40, you might want to think about going to work as a cowboy for someone else. If you want a good job, I suggest you hire on with someone who scored more than 60. He’s the one who’s Ranching For Profit.

 

Be sure to check out Dave Pratt’s Ranching for Profit website for more information and to see if his week long school would be something that will help your business!

Farm Finance

Every business or family finances have some unique components that you must determine to help your business or home run smoothly.  However, there are some very basic tools that apply to all.

  1. Bookkeeping-every family and small business should employ bookkeeping principles.  These will include records by account, labor costs, profit and loss (income statement), working capital, balance sheet, debt-to-asset ratios.
  2. Use a double-entry system to keep track of where your money is spent.
  3. Set up basic accounts, these may need sub accounts depending on your company, but here are 10 basic ones:  sales, expenses, payroll, and retained earnings for your income statement and cash, accounts payable, accounts receivable, notes payable, inventory, and owner’s equity for your balance sheet.

 

Most of us have taken basic bookkeeping in high school and so already have the foundation for setting up appicable accounts for our own families and businesses.  The stumbling block is actually doing it!  If you wonder where all your money is at the end of the month or year or complain about the lack of funds, then it’s time to make a resolution and commitment to keeping track of where your money goes. This especially includes all those little cash purchases; coffee, candy bar, water bottle, etc.  Remember, too, you don’t have to buy software to do this.  For millenia, record keeping has been done with pen and paper.  However,  if computer software will encourage you to move forward, I think there are some very reasonably priced packages out there.  Many you may be able to try out for free for a short time.

Here’s a budget helper that seems to be free, but i don’t know anything about is.  It is Dave Ramsey’s EveryDollar free budgeting tool.  Plus Dave Ramsey has a bunch of free tools available.

Whether you choose computer software or a pencil and notebook, start this year taking control of your finances.

Cheers!

tauna

Holistic Management Decision Making

Super intro to Holistic Management!

Creating the Farm and Life You Want With Holistic Management

Holistic management testing questions

HOLISTIC MANAGEMENT A WHOLE-FARM DECISION MAKING FRAMEWORK

Even though I’ve known about and used the testing questions for many years, too many times, i go ahead a purchase a band-aid which does nothing but make my work harder and negatively affect my quality of life and that of those i love the most.  While holistic management terms have been used mostly in farm and home circles, the precepts can be applied to most any business.

Good starter questions are:  Why am i doing this job?  If I can let nature do the job, then why am I not letting that happen?  Is there a better way?

Do you have daily repetitive chores?  You can probably get rid of them and not only save a tremendous amount of time, but also considerable out-of-pocket money.  Especially if they are non-income producing time-suckers.  Pets are notorious for this, but also having too many unrelated income streams.

For example, unless you have work horses (even then you’d better know your costs!), the time spent caring for and feeding them is astronomical with absolutely no return!  (unless you are using them for pleasure and have time to do so).  Horses consume 2% to 2.5% dry matter to the body weight or about 21 lbs for a 1000 lb horse.  About the same as a cow.  However, the cow is producing a calf on that same ration.  So, while feeding three horses you could be feeding three cows with the resultant calf sale each year which at current levels is about $1000 per calf.  If you spend 10 minutes a day feeding and watering the horses, in the course of one year, you’ve spent the equivalent of 60.8 hours!  How much productive work could you get done in 60 hours!  So, 60 hours times $15/hour is $900 plus feed, pasture rent, hay costs, water, vaccinations, hoof trimming, emergency vet costs.  You can figure your own costs, but a full-service boarding facility for a 12×12 stall is $250/month per horse (includes turnout and water/feed/hay) or $9000 per year for three horses.  This does not include farrier or vet services.  Pasture only boarding is $160/month, but you would need to care for the horse yourself.  What about tack, training, grooming?  Add up the costs and time.

In a continuous grazing situation, horses will do more damage to the stand of forage than cattle and even sheep in some respects because not only can they nip the new growth to the ground like sheep, but they are heavier and each step carries more weight per square inch than a sheep.  This often leads to pugging in soft pastures.  In other words, horses can destroy a pasture in no time at all.  As Penn State Extension puts it: “turning horses out on pasture should not start until the grass has reached a height of 6 inches, and should be stopped when grass has been grazed down to 2 to 3 inches.”  and “this grazing strategy (continuous) often results in overgrazing,…. The bad thing about this system, it allows horses to be very selective. Horses repeatedly graze the best-tasting plants. This stresses plants beyond their ability to survive. Pasture is never allowed to recover from grazing. In time pastures are soon turned into dry lots where only weeds will grow.”  Penn State’s recommendations are very basic, but a helpful start into learning about managed grazing.

Here’s a good starter article for pasture maintenance:  Care & Feeding of Overgrazed Pastures

This is just one example,  use the test questions against everything you do, gather information, and make the right decision!

Set goals, use the test questions, then really, really wait before buying work or any inputs.  If you need training to help you identify problems and what is a symptom, then get help!  Don’t spin your wheels getting nothing done or worse, digging a deeper hole and remaining confused by why you aren’t getting ahead.  Ask!  But if you are not ready to implement what you learn or make changes, then don’t waste your money or other people’s time.

HMI Testing Questions

Resources from Holistic Management International!

Creating Healthy Soil

Free Downloads

You and I won’t agree with all of HMI’s ideas, but there is a ton of good information and help for getting you started in a new business, established business, or life in general.

Shalom!

tauna

Prioritize for Profit

When it’s ridiculously cold outside, sometimes it’s best to just sit and think (once all the work and chores are done).  Here is a thought from a man whom I’ve yet to meet, who has words of wisdom worth pondering taken from his column “Strategic Planning for the Ranch” in Beef magazine

Prioritize for profit rather than convenience.

Sometimes convenience and profit are closely related, other times, they aren’t related at all or may even be antagonistic.  Don’t let your desire for convenience get in the way of improving profit — unless, of course, you’re already profitable enough and convenience can add enough quality of life to offset foregone profit.”

Burke Teichert, a consultant on strategic planning for ranches, retired in 2010 as vice president and general manager of AgReserves Inc.  He resides in Orem, Utah.  Contact him at burketei@comcast.com