Last week, with February’s Thinking Grazier and Notes from Kathy, we looked at the idea of sizing our operations to fit our vision and goals. Both John Marble and Troy Bishopp shared their personal thoughts behind why they had expanded their operations with leased pastures, and then whey they chose to let those leases go and downsize again. I talked about the cultural influences that make us, at lest as Americans, think that bigger is better. All of this is to help us think about what we want and how to get there.
Increasing the size and scale of your operation might be the right answer for you. Or you might find, as John Marble describes in this 2:39 video, that there are other ways to run your business and increase profit that don’t require more leased pastures or purchased land. In the transcript below, I’ve added some information and links to help you think about what your options are. Enjoy!
I’m John Marble. I have a small grazing and marketing operation in western Oregon.
Why did you come to the Ranching for Profit School?
I came looking for some help. I was in trouble. I didn’t know how desperate the trouble was at that time. I thought I was looking for ways to expand the operation. But it turned out that was maybe the last thing I needed to do. I had really severe problems with overheads that needed to be addressed. We had lots and lots of hay equipment, farming equipment and problems like that to overcome.
What did you expect to work on when you repeated the school?
When I came back to the school, I thought I was trying to solve the same problem, which was the problem of scale, and it turned out, as we got into the material the second time around, my problem was really that my economic theory was just too weak. The last thing I needed was to get more cows, get more units. Because I wasn’t making enough on any particular one of those to dig my way out of the hole that I was in. So we had already addressed most of the overhead problems. We’d gotten rid of a lot of scrap iron and then when I went home the second time it was to try and work to develop different things that I could possibly do with cattle and grass that would have a much higher margin.
So after the second school, we had made good progress on the overheads already, and we started working on other models that would produce better margin, better gross margin. And experimented with a lot of different things, including custom grazing and buying and selling different types of cattle and just doing different things with cattle and grass. And over time were able to really start working on scale and finding different ways to increase scale.
The three secrets to ranching for profit are:
1. Reducing overheads
2. Increasing gross margin per unit
3. Increasing turn over.
Now, Let’s Talk Options
One of the first things graziers talk about is reducing overheads in the form of equipment that just isn’t necessary once you start focusing on simply grazing instead of raising hay. That was an easy first step for John. The next steps were more difficult.
First he had to figure out how to increase his gross margin per unit. If you’re not familiar with this concept, John wrote a great article on it some time back. Not only does he explain the gross margin per unit concept, but he also lays out a good list to start with when you’re thinking about how to get there. Here’s the list he jotted down for his fellow ranchers:
These are just a few possibilities, all focused on reducing the cost per unit with a goal of increasing profit. When I spoke with John recently, he had some additions to this list:
“Stop retaining heifers. Buy proper replacement cows instead. If you simply must retain heifers, select some of your bulls for modest milk and frame.”
John also talked about custom grazing and buying and selling different kinds of cattle. Both are ways of making money with livestock and grass, and both require a certain skill level. For example, custom grazing requires developing a sound understanding and agreement that protects both parties. Buying and selling requires a solid understanding of your market and the ability to look at livestock and figure out what it takes to buy low and sell high. You can get a hint of that from his piece “These Might Be the Best Cows.”
Here are some suggestions from On Pasture for places to start:
Attend a Ranching For Profit School
Every single person we’ve spoken to has said that attending an RFP school made all the difference in the world to their business and quality of life. (And I’m not being paid to advertise this. This is just what I believe.) The school helps you focus on answering the questions that Dallas posed in his Recipe for Success article and provides participants with the tools they need to move forward. Yes, there’s a cost involved, but you can never go wrong investing in yourself.
To give you a flavor of what you can expect, sign up for the free introductory lessons and their ProfitTips newsletter.
Take time to figure out your goals and what you want your life to look like.
Check out On Pasture’s recent collection of goal setting articles for examples from fellow farmers and ranchers of their visions for their farms/ranches and how they are adjusting their businesses to meet them. Many of the articles are open access. Enjoy!