Recently I wrote about some alumni who increased the carrying capacity of their property using cell grazing. One alumnus who doubled the capacity using cell grazing said “It’s like getting a second ranch for free.”  That might be slightly overstated because increasing the capacity of a ranch with cell grazing usually isn’t completely free.  It often requires capital outlay for water development and fencing.  While that usually costs pennies on the dollar relative to buying another ranch, it is still important to be judicious with those pennies.

We advise our clients to insist that capital development projects give a 100% return on their capital investment within one year.  In other words, before you invest $50,000 in fencing and water development this year, make sure that that project will increase your gross margin by $50,000 this year.  If it won’t provide a 100% return, find an alternative investment that will return 100% or consider another way to make the investment.  For example, if you were to put $20,000 of your own money into the project, financing the balance, the project would only have to yield $20,000 to achieve a 100% return on your capital. 

Every time I introduce this principle at the Ranching For Profit School I get a lot of skeptical looks. I’m sure some people think I’ve lost my mind.  Their advisors have told them that capital improvements that pay for themselves in five, seven or even ten years are worth making.  But in ranching, where our biggest financial problem is that a disproportionate amount of our money is already locked up in fixed assets, that isn’t good enough.  Demand a 100% return on capital investments! 

To hear how Kyle Marshall applied cell grazing principles to increase his carrying capacity, click here.