The 3 Measures of Success in Business
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.