Ranching as a business – not a lifestyle

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It’s often said that ranching is a lifestyle, but it’s much more than that. Without a business mindset ranch owners can struggle to turn a profit. This includes prioritizing resources on cattle operations and evaluating their interactions will help with business decisions.

According to Mississippi State University Extension Beef Cattle Specialist Jane Parish, human capital is one of the resources that should be considered top priority.  

“People contribute expertise, skills, ideas, and effort to raising cattle,” Parish says. “Having access to great financial and physical resources can certainly provide advantages to an operation, but poor management of those resources by the people making and implementing the decisions will erode these other resources with little to show for it.”

Parish suggest that an investment is made in the quality of people working for operations, rather than a “cheap hire.”  She also mentions putting employees through continual training and education will help make them more equipped to complete their jobs correctly.

“For managers, this may involve not only keeping up with current technologies and best management practices, but also being exposed to additional technologies and trends that may be further developed or adapted to play a future role in the operation,” she says.

This ties directly into time management.

“Time and money are intertwined,” she says. “Make sure that the time that people put in to the operation justifies the payment for that time. Proper training and motivation of people can help to improve productivity per unit of time.”

Parish says to keep in mind that any time management decisions implemented need to be done with work and life balance in mind so employees don’t burn out.

Physical resources like land, cattle and forages are also part of the business equation.

“Both the quantity and quality of physical resources determine the production potential of the operation. Management then determines the degree to which this production potential is achieved with the physical resources available,” Parish says. “One pound of a lightly muscled or unthrifty calf likely has less value in the marketplace than one pound of a heavily muscled and healthy calf. Yet the financial investment in producing the more valuable calf is often greater than that of producing the less valuable calf.”

Parish says a challenge for producers reaching for the perfect management balance will be quality vs. quantity.

“Is having a large cow herd of marginal quality cattle more important than having a smaller herd of top-end genetics,” she says. “The best answer to this question may differ amongst producers based on their physical, financial, human, and time resource bases and external conditions. Some producers are very good at making money on large volume cattle sales, while others successfully focus on capturing premiums for fewer head.”

The final component Parish mentions is financial resources. Regardless of the situation, financial resources play a major role in every decision made regarding other available resources on cattle operations.

“No matter the resource use decision, there is a tie in to finances,” she says. “Reaching financial goals is often a driving force behind operational decisions. The financial well-being of the operation underlies all resource use decisions, constrains how large and fast the operation can grow, and determines how long the operation can continue to exist.”

When it comes time to evaluate resources for best management practices, Parish says to be sure and weigh how it will impact other components of the operation.

“A good place to start in evaluating resource use is to develop a resource inventory list. Then think about operational goals and how they impact each resource,” she concludes. “Make sure that goals are specific enough to prompt targeted resource use actions to achieve them. Understand that progress towards improving one resource base may come at the expense of another resource base.”

Click the links below for the full articles.

Prioritizing Resource Use on Cattle Operations Part 1: People and Time

Prioritizing Resource Use on Cattle Operations Part 2: Physical and Financial Resources

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charlie fox    
west virginia  |  February, 27, 2014 at 10:54 AM

If farming and ranching are approached as a 'way of life' rather than a 'way to make a living', soon neither option exists. This was a great essay.

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