The Value of a Day
What value does your business need to produce every day? Are you focusing on the right things to achieve this?
At the Ranching for Profit School we teach participants how to structure the economic information of their business into a format that is meaningful for making effective business decisions. Over the past few months I’ve done quite a few ranch visits with the goal of helping these ranches develop a plan for getting the business to where they want it economically and financially. I had the privilege of spending a day with Ranching for Profit alumni and current Executive Link members Sage and Faith Askin. I hear it almost everyday that it is impossible to become a full-time rancher unless you inherit it or are wealthy before you start. Sage and Faith have started a ranching operation from scratch and are continuing to grow! They are an inspiration to many. After a great lunch, I asked Faith and Sage to share their experience attending the Ranching for Profit School.
RMC differs from many others in that we do not allocate overhead costs to different enterprises unless some very specific rules apply. Knowing your ranches’ total overhead costs and profit target is an extremely useful number. Here’s why:
When looking at a ranch economically one of the first questions we address is “What are the total overheads for the ranch and what is your profit target?”. Some don’t know the answer to this, so we figure it out.
Let’s assume a 300 cow operation has annual overheads that are around $300,000 (a pretty typical number for many ranches). If our total gross margin from all of our enterprises was $300,000 we would break even. This isn’t Ranching for Breakeven, this is Ranching for Profit! We need a profit target. Maybe this ranch wants to reduce debt, put away some savings for retirement, or expand the business. If the ranch has a $50,000 annual profit target, we add that to the overheads for a gross margin target of $350,000.
I know that few if any of you only work 5 days a week, but if you did and took 2 weeks a year away from the ranch there would be 250 working days in a year. If we divide the $350,000 by 250 then we realize each working day better generate $1,400 in gross margin if we are to achieve our economic goals. When you head out of the house with a number like this in mind it can refine our focus to look for high value items. No more piddling away trying to save $20 by rebuilding a worn out widget, let’s figure out a way to eliminate the need for widgets all together!
If you critically examine many of the tasks we do it is easy to see that we get so distracted doing low-value jobs that we often run out of time for the high value jobs. Have you developed a “Stop Doing” list? Many Ranching for Profit alumni find that a key to increasing profitability is to stop doing the things that may have worked at one time but are no longer working. A “Stop Doing” list may also include low value tasks as part of an enterprise that is working. Those who are Ranching for Profit prioritize the high value tasks over the busy work.
Once you have your overheads and profit target developed it’s time to get to work developing a plan to achieve this. This plan should include challenging the overhead costs and looking for creative and aggressive ways to reduce those costs. In this year of challenging markets, many of your neighbors are spending their energy and limited management time complaining about markets. Where do you think your greatest return for time invested will be, complaining about markets or managing your business to be profitable even in years of lower prices? Let’s start Ranching for Profit today!
Hello, I’m Dallas Mount the new CEO and Owner of RMC. I’ve been working with Dave and RMC, teaching Ranching for Profit and Executive Link since 2012. My wife Dixie and kids Coleter (17) and Gracen (15) and current hosted exchange student Isa (15) live in Wheatland, WY where we also custom graze, pairs on sub-irrigated pasture. I’m beyond excited to lead RMC into its next generation carrying on and building on what Dave and Kathy have continued from Stan.
The new Ranch Management Consultants headquarters is up and running in Wheatland, Wyoming! I’m blessed to be joined by an amazing team! Marilyn is our lead admin, Jamie as bookkeeper, and Andrea as social media director. Dave, Kathy and their team have made the transition easy by documenting systems to follow and creating a reputation of excellence. I’m deeply grateful to Dave for trusting me with this company and I feel an enormous sense of responsibility to carry on the tradition of excellence in teaching and quality that Dave and Stan have established.
In the short-term RMC will be much the same as we get everything figured out. My first goal is to successfully make it through our busy season which starts now and runs through March. After that we will pull our heads up and strategize on RMC’s future all while keeping laser focused on our mission of Healthy Lands, Happy Families, and Profitable Businesses.
I’m humbled and grateful to you, our clients, who believe in RMC. You continue to invest your trust, time and money in us so we can deliver high quality products to you. I do not take this responsibility lightly, and will continue to strive to maintain excellence in what we do.
October 09, 2019 at 6:01 am, Elton Mau said:
Good luck, you have big boots to fill.
October 13, 2019 at 4:17 pm, Ron Sealock said:
I like how you simplify the math and the thought process to get to a practical metric. While I agree with the premise as well as the thought process, I think it is important that we correctly identify the $100/hr jobs. It’s not a simple as staying in the office and working on spreadsheets or planning your grazing program for the coming year. I believe it’s important to run the feed truck (or insert another “non-manager” job here) from time to time. We learn things in that process and see things that may be bottlenecks that we wouldn’t experience when we concentrate on the “manager” tasks. In addition, sometimes it’s just therapy to go out and cut a few cedars for an hour or two. It doesn’t hurt your employee relations, either.
October 13, 2019 at 4:44 pm, Kent Hunter said:
Dallas Mount has my vote to be a fantastic leader for RMC
October 14, 2019 at 8:25 am, Dallas Mount said:
Thanks for the confidence Kent!