The second question on Ryan Goodman’s list:
Write about the basics of farming and ranching.
We can have all the discussions possible about the different practices in production agriculture. As I stated in my response to question one, we are in the business of growth and promotion of life. Thing is, it all hinges on one thing: Profit.
To some farming is a hobby, and therefore profit does not matter. For most of us farming is a business, and profit is to a business as breathing is to life. If there is not a profit the likely hood of losing the farm is high.
I spend time everyday looking over market reports. I have them bookmarked on the computer, and on my phone. I just scroll, click, and boom, I have access to weighted averages from cattle auctions all over the United States. Marketing skill is the number one contributing factor to profitability, so it is essential to always be up on this. Since I sell and buy, pot loads every month I must know what is going on with the cash markets.
One thing I do every month is what I call an autopsy. I go over every aspect of my business. Today my business is whittled down to my “hedgehog concept”, the one thing I’m best at. I used to have many more different enterprises. I believed I needed them for diversity, and at the time I did need them. My hedgehog concept became evident to me, through these autopsies. It was clear that I should devote more resources to it and disperse of the other enterprises, making the best use I could of my resources. I look at things like my return on assets and return on investment, and even the time/labor I committed to them
As a result of these monthly sit downs, I know exactly what my break profit cost of gain is, on the cattle I own. Notice I said break profit, and not break even. You can go broke breaking even, so I always include profit as an expense. My salary is figured as an overhead expense to the business, and I figure profit as a direct cost.
Every month I do a budget for the upcoming months. I gauge the accuracy of my budget during the autopsy. I have been doing this for years so I have a good feel for what each month will be like. While doing this I also do a projected cash flow for the upcoming months. This is useful for long term and short term planning.
After completing these tasks I find it much easier to go out and do the day to day tasks. I am not worried about my account balance, or what the market may do, I do not fear having to talk to the banker, and the demons of fear do not come into the bedroom at 2 am, waking me up. Knowing everything is in check allows me to focus with a greater intensity on the wellbeing of my animals, and any other tasks that I need to complete.
Looking after my business is the foundation of what I do. When that is stable I can build from there. One thing I do to reinforce the foundation is to read several business books every year.
Another basic is how you see yourself. If you see yourself as a broke farmer, then that is what you will be. If you see yourself as having a growing, thriving operation that is making a profit then that is what you will have. It is not quite that easy though. The people that see themselves as being a success and firmly believe it, without doubt, are the ones who are willing to go out and learn the things that they need to, in order to make it happen.
I understand this may be a different direction than most would think when responding to this topic. Feeding the livestock, or putting seed in the ground are basic necessities too. You can do those for someone else as an employee, but if the employer doesn’t do the basic task of looking after his business, that employee may be out of a job sooner than later. As capital intense as agriculture is you simply just can’t out earn stupid.