Taking note

Keeping records enables land owners to answer all kinds of questions about their operation. Without records noting choices made, when they’re made, how much they cost and so forth, operators are unable to determine if what they are doing is effective and efficient.

By keeping records land owners are able to answer questions like, “Should I keep spending money on my weed management plan?” Records can also provide insight into the operation and help identify meaningful patterns.

The following is a step-by-step example of how to address a question, find the information to answer the question and what to do once the question is answered.

Scenario: You have many ranch enterprises, and you want to know if spending time working your goat business makes sense.

Ask a question: Does your goat business make enough money to cover all the costs of inputs?

What do you need to know to answer the question: Variable costs and income (you can temporarily disregard fixed costs).

Goats’ variable costs: are the costs that come up daily. These are things that might vary depending on the number of goats in the herd or by how much milk is produced. Variable costs in this scenario could be feed and jars to bottle milk.

Although, we are temporarily disregarding fixed costs, they are important to keep in mind for the long run. In this scenario fixed costs are things like the cost of the goats and the buildings used for milking the goats. The fixed costs can be temporarily ignored because the goat doesn’t have to be paid for in one day, but over time the cost of the goat has to be covered. Just like a mortgage payment doesn’t have to be paid with a single day’s wage, but over the course of the month, enough money must be available to make the payment.

Other Variable Costs: If the goal is to determine if the land owner should work on the goat business or another business on the ranch, they also need to take into account labor and benefits. These are things like mortgage payments, electricity, groceries, and may even include things like depositing money into a savings account. The goat business has to pay for the goat variable costs in their entirety, but because there are other ranch enterprises, these additional labor and benefit costs can be divided amongst all the enterprises. For example, if there are give ranch enterprises, the goat business has to pay for one-fifth of the labor and benefit costs.

Income: In order to determine the income, the land owner needs to know the product they are producing, how much the goat can produce and how much to sell it for.

Organizing the

information

All of this information can be organized in an Excel spreadsheet. Excel is a great tool because of the cell calculating equations. The addition of copy and paste to the equations also makes running various scenarios less time-intensive than traditional pen and paper, which allows the land owner to better analyze management decisions.

Once data has been organized it’s time to analyze. Should you keep doing what you are doing, or is time to try something new?

If the costs for the goat business are greater than the income, there are still options. Consider if there is any seasonality to the goat business? Is there a time of year that the demand for milk is greater (maybe during the farmers market season), or when the goats are able to produce additional milk (peak lactation)?

Other options might include increasing the price at which milk is sold, or maybe the goats can be leased to neighbors for weed management to cut down on the costs of feed. However before making one of these changes consider the risks. Will leasing the goats for weed management decrease the quality of milk? Will increasing the cost of milk decrease the customer’s willingness to purchase?

For help with Excel, or to talk through a management question, I am readily available. I can also build the Excel templates for your specific operation. Please contact me at [email protected] or (307)328-2642.