A recent article in The Western Producer shared information about a six-year study of 25 bison ranches that was analyzed by the University of Alberta to determine key factors in profitable ranching. The conclusion, not surprisingly was that cost control and good investments were the critical skills for the ranches who performed the best.
Key operating costs included: trucking, property taxes, fuel, repairs, insurance, utilities, barns, corrals and feeder animals were designated as operating costs. The biggest cost within that area was buying feeders. But top performing producers spent more of their budget on investing in feeder animals, while spending $300 less/animal than the lower performing producers. In other words, they spent more time and had more knowledge to get a better deal.
HMI Certified Educator, Roland Kroos, of Crossroads Ranch Consulting in Bozeman, Montana focuses his business on helping bison producers improve their financial and production management by teaching them Holistic Management principles and practices. Having been in the business for many years, he has seen producers assume they can let cost of production rise as income for an animal rises. Of course, the market cycles make such decisions dangerous. Roland is quoted in the article as noting:
“We need to be constantly vigilant in where we believe this market is going. We need to understand the signs and maybe we are getting to the top,” he said. “I wouldn’t bank on $6.50 a pound prices on the rail to make your mortgage payment because what happens if that goes back to $4 and you can’t make your payments.… The bison market will flatten out. It is an illusion to think we can keep growing at the same speed we have for the last five to 10 years.”
To make sure that you don't fall into that trap you need to set realistic benchmarks or metrics using a profit margin that you can live with assuming a conservative gross income for your product. That kind of rigorous financial planning then allows you weather poor markets and increase profit in good years to invest in the resilience of the business.
Holistic Management has helped many producers learn how to increase their profits by reducing their feed and vet costs through improved grazing practices. In turn, these improved practices help improve land productivity, increasing profit even more.
Download HMI's free e-book on Holistic Financial Planning today to learn how to make your business more profitable.
Read this HMI Success Story to learn how Holistic Financial Planning helped save Sunnybrae Farm.
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