How do you know when it is time to move animals from one pasture to another?
Most people figure that if they are out of feed in one pasture, it is time to move. The herd is probably standing at the gate voicing their agreement that it is time to “Mooove.” There’s nothing they’d like better than to be in fresh, clean forage in the next paddock.
A lot of people tell me that they want to be “debt free.” They are tired of making big interest payments on land, livestock, machinery and their operating note. They have had too many sleepless nights worrying about making the next payment. They believe that if they didn’t have to borrow money they would be more profitable and financially secure.
Letting government programs dictate your management and set priorities can be costly. The most obvious example is probably the emergency feed program. In drought impacted areas, this program incentivizes ranchers not to destock. The result has been severe overstocking during drought, when the impacts of bad management are intensified.
For decades we’ve been encouraged to evaluate the efficiency of production by focusing on weight weaned per cow. Now some are arguing that the critical measure should really be pounds weaned per acre. But neither measure is very useful.
How is the next generation ever supposed to step up if the current generation can’t step down or at least step aside? The short answer is they can’t. It’s one reason managerial authority on many ranches skips a generation. More calamitous, it’s a major reason why young people don’t stay in ranching and multi-generational ranches are disappearing.
There are two big pieces to the estate planning puzzle: who will run what (management succession) and who will own what (the transfer of assets). In my last ProfitTips column I called management succession the more difficult of the two because it involves judging the competency of people you love and holding them accountable to produce results. It is perceived by the incoming generation as an issue of respect. But the transfer of assets is no cake walk either.
Most people assume that the biggest estate planning fights involve “Who will own what?” It’s been my experience that “Who will run what?” is often a bigger issue. “Who will own what?” is usually a question of perceived fairness. To heirs, “Who will run what?” is a question of respect.
If you have a family ranch, whether you know it or not, you have a family employment policy. At least your kids think you do. In the absence of a formal, written policy, kids often grow up with the expectation that regardless of their education, experience or talent, there will be a role for them in the family business.
University of Wyoming Extension agent and Ranching For Profit School instructor, Dallas Mount, recently led a management succession workshop in Baggs, Wyoming. Dallas is a gifted, innovative teacher, and I was flattered when he asked me to participate in the program.
Dallas did a great job of distilling successful succession into five core areas:
In a recent Three Secrets For Increasing Profit® workshop I asked participants how much profit they want to make. It is an important question because you can’t hit a target that doesn’t exist and it’s impossible to build an intelligent plan unless you have measurable goals.