Record cattle prices have increased the profit (or reduced the loss) for ranchers throughout North America. If you use the Ranching For Profit definition of profit many, are still operating at an economic loss (for more on that click here). With increased income you are probably facing some important decisions. Your accountant may advise you to prepay 2015 expenses or to buy new equipment or vehicles to reduce your profit and avoid paying taxes. This advice may have short term advantages, but often leads to a less profitable business.

At our recent round of Executive Link meetings I asked members to create “To Do” and “Don’t Do” lists of things that smart ranchers should consider doing or not doing with the increased income.

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When the gross margin per unit of an enterprise is healthy, increasing turnover in that enterprise will increase profit. The challenge lies in finding the capacity to add more units without increasing overhead costs. When we think about increasing turnover we usually think in terms of how many units we can run on the land we have, or what we’d have to do to get more land. Let’s see if we can stretch those boundaries to consider other alternatives for increasing turnover.

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The Three Secrets For Increasing Profit: Part 2: The Unit The most basic unit in livestock enterprises is the animal. Knowing your gross margin per steer or cow or sheep […]

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Look in any farming or ranching publication and you will find articles about cutting feed costs and improving production efficiency, but you won’t find anything about reducing land, labor and other overhead costs. There are two reasons for that. First, no one stands to make any money when you cut overheads (except you). Second, most people believe that overhead costs are “fixed.” At the Ranching For Profit School we contend that there is no such thing as a fixed cost. Thousands of our clients around the world have increased profit by radically reducing their overheads, proving that overheads don’t have to be “fixed.” That’s an essential paradigm shift if you want to ranch for profit.

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Cutting overheads, improving gross margin per unit and increasing turnover, if the gross margin per unit is healthy, are the only three things that anyone in any business can do to increase profit. At the Ranching For Profit School we call them the Three Secrets for Increasing Profit. For the last several years you may have heard industry pundits stress the importance of unit cost of production. When I see these articles I have two reactions—“Duh” and “So what?”

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This summer each of our Executive Link boards met on one of the board member’s ranches. This has helped boards get a deeper understanding of one another’s situation and I think it has increased the effectiveness of the boards. With the summer about over and the final board meetings completed, I spoke to my colleague, Allan Crockett, about the effectiveness of the sessions he’d facilitated. Allan felt that the meetings had been very effective. Then he shared this insight, “Everything is a people issue.”

He wasn’t just talking about people having inadequate skills, problems with time management, or communication issues, although those can all be problems. He was talking about prices, costs, debt, weather, and every other issue you can think of. His point was that it isn’t these challenges that determine our success or failure. It is what we do about these challenges that makes the difference.

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Having an animal that’s adapted to the environment is a critical component of building a profitable livestock business and genetics play an important role in determining an animal’s fitness. But there are even more important considerations.

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John Marble has an eye for good cattle. Of course what John calls “good” might make traditional ranchers scratch their heads. But John isn’t concerned with pedigrees. The only papers he wants to see are the green ones with President’s pictures that each animal he buys returns.

John and I spent an enjoyable day together last week hiking to a cascade lake and talking about land, life and livestock. John and his wife Chris ranch in the Willamette Valley of western Oregon. It’s in an environment where land is expensive and large scale leases are hard to come by. That makes increasing turnover by traditional means difficult. It also means that it is even more important to keep overhead costs low and the margin per unit high. John’s highest margins come from buying undervalued cattle and adding value. A lot of the animals he buys come from the local sale barn.

John told me, “Most people see a sale yard as a cesspool of disease-ridden and defective cattle, unless of course they happen to be selling their own cattle there that day.” One local producer recently asked John, “How can you stand sitting in the sale barn and buying those cattle.

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A few weeks ago I visited with the owner and manager of a high-desert ranch to explore ways to improve ecological processes and the overall productivity and profitability of the place. We threw down some plot frames and estimated cover. We agreed that 90% of the range was bare soil. When I asked how they thought the place should be managed they talked about “impacting” the soil, “hitting” the pasture, “attacking” the weeds and grazing the grass down. It was like they were talking about doing battle with an enemy. It reminded me of something I heard Bud Williams say. He said, “Cattlemen love their cattle and hate their grass.”

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Yes, you are at the right place! Welcome to the new look of Ranching For Profit’s blog page. Our blog host recently implemented changes resulting in some changes in the […]

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