by Doug Toburen — Those attending the Spring Forage Conference heard Ranch Management Consultants CEO Dave Pratt make a pretty big claim.
“Farming and ranching can be profitable,” Pratt told producers last week in Springfield, Mo. “Ranching for profit is not an oxymoron.”
In addition to making such a bold statement Pratt told producers it was time they quit looking at how their neighbors are doing things wrong to justify what they are doing is right.
“The key to making a farm or ranch profitable is to quit treating it like a farm or ranch and treat it like a business,” he explained.
He backed up his point by comparing a farm or ranch to a company like IBM.
“If we look at IBM what are we doing different than they are?” he asked. “They produce a product and so do we. They have to market that product and so do we. They have to make money to stay in business, so do we.”
Pratt challenged each producer to look at his or her operation and determine whether it’s a business or a collection of assets.
If it is a business, according to Pratt, it is time to start working for your money and let your money start working for you.
“We need to be setting up accounts to put money in and let it earn some interest,” he said.
Pratt reminded producers that there are a number of reasons people decide to get involved with farming and ranching.
“Whether it is the lifestyle, a home on the range or wide open spaces, before it can be any of these it has to be a business,” he said.
When looking at new businesses, Pratt said 95 percent of them fail within the first 10 years.
“This doesn’t apply to farming however,” he explained. “We don’t see it in farming because we can operate at an economic loss and survive due to the fact that we are subsidized.”
Whether with off-farm income or because of inherited land today’s producers are subsidized, he added.
Another reason, according to Pratt, farm and ranch operations don’t fail is because those that are running them are willing to work for free.
“Could you get someone else to work for that?” he asked.
Pratt reminded producers to be honest with themselves when they look at their operation.
“If I asked you why your business isn’t profitable you would more than likely say because of low crop prices, the weather and high input costs,” he explained.
What if he turned the question around though and asked why the neighbor isn’t profitable?
“The answer is always management,” he joked.
Yet, when it all comes right down to it, according to Pratt, you can’t do anything about what’s out there except manage it.
He went on to say that there is a big difference in running a business that raises cattle and grows grass, as opposed to just raising cattle and growing grass.
“Are we doing things right?” he asked. “Or maybe more importantly are we doing the right things? These are all the questions you need to be asking yourselves.”
Getting wrapped up in the lifestyle of farming and ranching often has taken the profits out of making a business out of the business.
“The purpose of your life is not to support the farm. The purpose of the farm is to support your life,” he stated.
And, in order for this to be possible, Pratt told producers there are five essential traits of sustainable farms and ranches.
These include:
1. Work on the business, not just in the business.
2. Work on the numbers.
“You need to know where you want to go and it has to economically viable,” he said.
3. Know what the numbers mean. Is it good or bad?
4. Work on relationships.
In the comparison Pratt made between a farm or ranch operation and IBM, one of the major differences was in handling personnel issues.
“Companies like IBM have a human resources department that takes care of personnel issues,” he explains. “We don’t necessarily have that on the farm.”
So, according to Pratt, it is important to learn how to hold people accountable in a respectful way.
5. Synchronize with nature.
“Do what we can, when we can, but let Mother Nature do the work,” he concluded.
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