A young cow-calf producer recently said, “I need to buy more cows; I can’t make a living with the number of cows I have.” As we bumped across his pastures in his RTV taking soil samples, he shared more about his operation and the way he manages his herd records.

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Freelance Writer
Melissa Beck is a freelance writer based in Oklahoma.

Essentially, his cows have eartags; he may know which ones didn’t calve – and that’s about the extent of it.

Some things he could do today to make his cow herd more profitable became evident. To start, there are some cows in the herd that absolutely need to be culled.

Second, he needs a short, clearly defined calving season so he can market his calves in a uniform group and customize his supplementation to his cows’ stage of production, consequently saving money on supplementation costs.

Finally, he needs to establish a record-keeping system that works for him so he can use benchmarks and production records as a road map to this overarching goal of making a living with his cow herd.

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Damona Doye, professor at Oklahoma State University, says “Producers are motivated to keep records by the weight that they place on profitability and business performance.”

Big goals are just dreams if you don’t chop them into the bite-sized action steps required to reach them. A business that doesn’t make money is a hobby, and there are some basic business planning principles that serve as a guide to reaching a desired outcome.

First, create a vision, mission and goals, then check production and financial records regularly to assess how successful the operation is at reaching the goals you’ve set.

Vision

Start with the big picture for your ranch. If your vision isn’t big enough to scare you, think bigger. Rutgers University created a list of questions to help you develop a clear vision for your operation:

  • What values do I hold that I will not compromise?

  • What characteristics do I want to portray to people?

  • What principles do I stand for?

  • How do I want to be seen or thought of when I interact with people?

  • What do I want in life?

Mission

In Simon Sinek’s book, Start with Why, he explains that successful businesses clearly articulate the why of what they do: “What is your purpose, cause or belief? Why does your company exist? Why do you get out of bed every morning? And why should anyone care?”

A good mission statement unifies everyone involved in the farm or ranch around a common purpose and direction. It provides checks and balances for key decisions and is a concise statement of the purpose of the operation.

The mission of your operation is a short statement of:

  • Who your company is.

  • Why you’re in business.

  • What your business accomplishes or what problem it solves for the end-user, employees and owners.

Here’s a tool to help you get started (Table 1).

Questions to ask yourself

Goal setting

In his book EntreLeadership, Dave Ramsey says goals are your vision and mission with work clothes on. “We have dreamed the impossible dream, clarified it into a vision and directed it with our mission statement, so now it is time to do something.

Goals are the heavy lifting and cause the heavy lifting to occur.”

Written goals move from the realm of dreams to goals. To be effective, goals should be measurable, specific and with a time frame.

There’s an acronym for this – SMART – S (specific), M (measurable), A (agreed upon), R (realistic) and T (time-based).

Measuring success using benchmarks

It’s easy to get so busy with the daily tasks of running a ranch we neglect to assess how our operation and cow herd are performing and whether or not we are on target to reach our goals.

In order to assess anything, we have to have a standard to compare against, and we have to regularly track our progress. The comparison standards are the benchmarks, and the way we compare is through a performance analysis.

According to the USDA, the average cow herd size is 40 head. Producers with small cow herds don’t have the ability to use economies of scale to spread cost of production over a larger number of cows. This makes efficiency and performance of the cows in a small herd even more important.

What is “performance analysis”? In business, it has several meanings. It can relate to the examination of financial performance indicators compared with the results of similar businesses.

Alternatively, it can be an examination of individual employees’ performance to determine if problems like low output, poor quality of work, excessive waste or failure to perform important tasks are affecting the performance of the organization in meeting goals.

On the farm/ranch, it’s much the same, but in a cow-calf operation, the primary employees are the cows. As in other businesses, we have to collect information to base our employee performance evaluations on.

These are the important performance indicators, and they can be divided into two overarching categories: production performance indicators (how the employees, aka the cows, are performing) and financial performance indicators (the overall financial performance of the cow-calf business).

Shane Gadberry, professor at the University of Arkansas, says, “I think it’s hard to work toward a goal if you don’t know where you’re starting or know when you’ve arrived at your destination. Animal and financial records are needed to track change and identify obstacles.”

To get a clear picture of whether or not your operation is on target to reach your production goals, it’s important to set your benchmarks so that you have something to compare back to as you move forward. Benchmarks are a snapshot of your current level of production. It’s meaningful to compare to your own operation.

Production performance indicators (How are the employees doing?)

When analyzing a cow-calf operation, the more years of data a producer accumulates, the clearer the picture of potential for improved profitability.

Gadberry says, “For small cow-calf producers, the most important benchmarks to start tracking would include cow pregnancy status at weaning, calving dates, calf-weaning dates and weights, and production expenses, particularly looking at fixed and variable costs.

For herds that don’t have a set breeding season, tracking cow postpartum interval in addition to pregnancy can be a helpful problem solver.”

Here are some common production records to keep (Table 2).

Common production records to keepDoye says regular and consistent performance analysis over time can help the ranch manager to:

  1. Identify areas where the ranch business has excelled, as well as opportunities for improvement.

  2. Make more informed decisions relative to marketing, investment, production and risk management.

  3. Formulate goals and monitor progress toward goals.

  4. Compare the ranch investment performance to other alternatives.

  5. Develop employee incentive programs.

  6. Monitor and control costs.

  7. Establish the competitiveness and profitability of the total business, as well as individual enterprises.

  8. Evaluate present resource use and identify areas for change.

  9. Meet information needs of multiple owners, lenders and advisers, so their knowledge and skills are used more effectively.

Financial performance records

Many farmers and ranchers rely solely on their tax forms as indicators of financial performance; however, tax returns don’t show the whole financial picture.

Doye says, “Financial records are equally important to making informed decisions. Research confirms that controlling costs is one of the most valuable things that a manager can do in maintaining profitability over time.

Knowing the ranch’s costs of pasture and feed, for instance, and how it compares to other producers can motivate introspection into ways to manage forage resources better. Being an above-average producer sets you up to be sustainable.”

There are several ways to track costs, and there are many tools available online to get started:

  1. Receipt and expenditures by enterprise

  2. Income and expenses

  3. Inventories

  4. Capital account (machinery, equipment, improvements, buildings and other capital investments)

  5. Credit accounts all business liabilities, how much is owed and to whom

  6. Non-ranch income/expense accounts (This will be non-farm living expenses and off-farm income. It’s best to keep farm business and personal accounts separate.)

  7. Balance sheet*

  8. Income statement*

  9. Cash flow statement*

*These records provide the data to measure financial and economic efficiency of the operation.

The markets are unpredictable, and now more than ever producers need to use production goals and performance indicators to evaluate the success of their ranches; no better time to start than now.  end mark

PHOTO:  Use your ranch’s benchmark data to measure success in reaching production goals. Photo by Melissa Beck.

Melissa Beck