The 3 Measures of Success in Business

by Dave Pratt

In nearly 40 years of helping ranchers improve their land, their businesses and their lives, I’ve found that there are three things we need to measure to determine the success of a ranch business, or any business for that matter. They are: Profit, Effort, and Fun. Let’s take a quick look at each of these.

Is it profitable?

If it isn’t profitable, it’s not sustainable. That doesn’t mean you need to be as profitable as a benchmark ranch business (>9% ROA). The first step in identifying a profit target is to determine what your profit is for. Do you want to bring the next generation into the business? Do you want to retire one day without being dependent on the next generation? Do you want to build reserves or expand the operation? Congratulations if you are making enough profit to do the things you want to do. If you aren’t, your business is not sustainable.

How hard do you work?

I often hear people brag about how hard they work and the long hours they put in. They wear their work ethic like a badge of honor. When I hear the claims about working 6 or 7 days a week, 10 to 12 hours a day, or more, I just shake my head and think, “Wow. If it takes that kind of effort, this is a really weak and vulnerable business.”

Sometimes it takes a burst of unsustainable effort to build a business … a year or two of going flat out to restructure enterprises, to build infrastructure or to create the systems for running your business, but you cannot run a sustainable business on unsustainable effort.

Are you having fun?

This is one of the first questions I’ll ask someone who calls me with questions or concerns. If you aren’t having fun, I don’t care what else is happening on the ranch, it isn’t sustainable. 

Most definitions of success include some mention of ecosystem health. But ecosystem health goes without saying. If the ecosystem is sick, the ranch isn’t going to be fun, it’s going to be a whole lot more work to make up for what nature could provide, and it’s not going to be profitable.

I’m not the only one who’s come to this realization. Joel Salatin wrote,” If our farms aren’t fun, if they are too much work, and if they aren’t profitable, our kids aren’t going to want them. Romancing the next generation is the ultimate test of sustainability.” Joel got that exactly right.

8 Responses to “The 3 Measures of Success in Business”

September 25, 2019 at 3:30 am, Jenn Colby said:

Dave,
Thank you so much for taking a chance on us up in the Northeast, and connecting us into the wisdom of folks across the country. I hope that we are sharing some of our wisdom to help them think differently, too.

I feel very much in the unsustainable phase, but it’s more worth it now than it’s ever been before. We are working toward a shared goal in an entirely new way than we ever have before. I’ve fallen down the rabbit hole of Kiyosaki (and friends), E-Myth and Good to Great, I’m testing new ideas at work and leveraging OPM at home. I see a future that I’ve simply never seen before. Thank you.

I’m thinking that I will plan to attend the Albany school in February. I do want to get to a school out of our region, but there are a few too many irons in the fire for the timing of the other open schools to work. In the meantime, I will do my best to drum up more NE customers for you!

Much love to you and Kathy and Robyn and Andrea. I look forward to getting to know Dallas and Alan.

Jenn

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September 25, 2019 at 4:57 am, Alec B said:

Dave I’m sad to hear this is the last ProfitTips we’ll be reading from you. Thanks for all you’ve done and best wishes to you. And as always, great article. Cheers.

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September 25, 2019 at 5:58 am, Leslie Watts said:

Sir, Thank you. I have not attended any of your schools, but I encourage anyone seriously involved in ranching to attend. I hope you enjoy a rich future.

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September 25, 2019 at 7:51 am, John Marble said:

Thank you, David. And especially for the inspiring video in this week’s ProfitTip. You have once more caused me to think about what has worked well and what hasn’t. Looking back, as I got older and slower and lazier and more interested in having fun, I believe I found the one thing that has allowed me to continue making progress: personal relationships. Over the years, I have built a network of great friends. We cooperate in business and help each other constantly. These are folks of high character and huge talent, and that has been the key for me. If we need to be gone for a week for an RMC event or a fishing trip, I feel confident that I can make a few calls and the pieces all fall into place. In short, people, really good people, have been the source of my success and happiness. And of course, that includes you and Kathy and all of the RMC family.

Most sincerely yours,
John Marble

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September 25, 2019 at 5:17 pm, Jenn Colby said:

I love this John. Was just driving around today after a workshop with some RFP grads practicing a tool we learned together in RFP…and feeling exceedingly grateful to be lucky enough to have these relationships!

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September 25, 2019 at 9:29 am, Pam Stevens said:

Dave, you’ve helped so many people with realities of ranching. You should be very proud.
I’m sure Dallas will bring new perspectives but you’ll be missed.

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September 25, 2019 at 12:09 pm, Burke said:

Dave, so many thanks to you, Cathy and your team. The quality of instruction at the RFP schools is the best there is. I wish Dallas and his team continuing success; and I wish you a very happy and rewarding retirement.

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September 25, 2019 at 3:18 pm, Julie Elliott said:

Great video piece, Dave. I wish you the very best in your retirement. Dallas, I look forward to hearing you in Wyoming in October!

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