Pondering Business Tools
One of the truly great gifts of the Graham Ranch comes from the seasons. My husband, Steve, and I work at various jobs and projects, depending on the time of year. Sometimes, we work in crisis mode because the job absolutely has to be done right now — jobs like lambing, calving and haying can not wait.
Other seasons, we get to slow down and consider important aspects of our lives instead of reacting to immediate crises. We still get to feed the cattle and sheep, fix frozen water troughs and stoke the fire, but winter is a good time to plan to reach important goals: Which special activities will we do with the kids, what are we doing to stay healthy and what will we do to stay in business again this year?
One of my plans for 2011 touches on both my own mental health and our ranch business health. Steve and I value education above most other activities so I plan to attend at least three educational workshops this year.
My first seminar was the Advanced Management Workshop sponsored by Northwest Farm Credit Services. I‘ve been to a variety of Farm Credit classes before and, as usual, I learned a lot.
First, the Graham Ranch is a bit larger than the average-sized ranch in Montana, but I represented a small operation compared to the other participants. Still, Steve and I manage the business end of our operation as well as some of those million dollar a year income operations — and we always have room for improvement.
Interestingly, regardless of an operation’s size, most businesses don’t have stated goals. Apparently, managers just wing it by trying to make money whenever they can. Steve and I have written definitive personal and business goals and often we fall back on those goals.
Whenever we face a major business decision, one or the other of us asks “How will this help us raise our livestock sustainably or help others understand why we run the ranch the way we do?” If an opportunity does not help us work toward one of those two goals, we don’t pursue it.
The class spent a lot of time learning about the details of accounting — return on investment, return on equity, capital debt repayment capacity and such. Many of the participants commented that this kind of bookwork reminded them of why they liked to work outside. But the speaker, Dick Wittman, gave us the tools to turn data — our bills and income — into information that we need so we all can keep working outside.
For instance, Wittman said that most farmers and ranchers do not know how much it costs them to grow or raise the food they sell. Instead of setting a profit goal and then looking at the various options for selling to meet that goal, many producers just take the price that a buyer offers. If all the bills can not be paid, the producer reacts to the financial crisis by hoping for a better next year.
Our cost of production at the Graham Ranch is higher than some producers and much lower than others. Steve and I know how much each cow and ewe has to bring in each year, some way somehow. That information tool is important so we can plan improvements and evaluate opportunities.
Four-year-old Abby summed up what is important the other day when she asked “Why are we on earth?”
Certainly not so we will know our cost of production. But improving our financial management skills helps us to live for the important aspects — our kids, our passions and each other.
My answer to Abby’s question: “To be nice to people and take care of the land.”
Lisa Schmidt and her husband, Steve Hutton, raise natural, grassfed beef and lamb at the Graham Ranch near Conrad.
She has two children; Will, 12, and Abby, 4.