RANCHING Business
“The fi rst dollar that producers spend should return
them the highest amount,” Childs says. “The second dollar they spend should return them the second high- est amount.” Once the producers have completed the fi rst project
and are enjoying returns from their investment of time and money, they can move to the project that offered the second highest rate of return, he says. Second, producers should ask, “How long will it
take me to see a return on my investment?” “Generally, if a producer is looking at 2 similar in-
vestments, the one that produces a return more quickly is the better option,” Childs says. For instance, a producer determines that purchasing
additional females is the top priority for his operation. If he buys a load of 7-month-old heifers, it will take several months for the heifers to reach breeding age. It will take another year for them to calve and an addi- tional 7 months for the calves to reach market weight; therefore, the producer will have to wait roughly 2 years to get his fi rst paycheck. If he buys a load of heavy-bred cows, they could calf
within a month or 2. Their calves should be at market weight within 7 months, meaning that the producer
could earn 2 paychecks from the bred cows in the time it would take to earn 1 paycheck from the heifers. “Thanks to the time value of money, a dollar today is worth more than a dollar tomorrow,” Childs says.
Diversifi cation Diversifi cation is a form of risk management. “Oftentimes, producers only look within their fences
for investment opportunities,” Childs says. “I think that sometimes they should consider outside opportunities so they are not so dependent on a single industry to provide for their retirement and a revenue stream in later life.” A fi nancial planner can help producers explore the
options, but they include savings, 401(k) plans, Roth IRAs and mutual funds.
Closing thought “The importance of knowing your fi nancial position
cannot be overstated,” Swigert says. “Those people who stay informed and stay up-to-date have the opportu- nity to plan for the things that are to come. They are generally the ones who have additional profi t and get to ask: Where is the best place for me to invest it?”
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74 The Cattleman November 2015
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