should be identifi ed,” Bevers says. “Then, a year after the goals are set, they should be evaluated as to whether the goal was met, exceeded or remains.” He says a formal ranch plan forces all team members
to agree to the past performance of the operation and the future direction of the operation. “Each operation will have to decide who develops the plan, whether it is the owner, the manager or an outside party,” Bevers says. Areas of change are identifi ed and how they will be
attacked is determined. A ranch plan will put the ranch operation on a path to fulfi lling the goals of the owner.
Executive summary of the business plan Bevers notes that an executive summary should accompany a detailed ranch business plan. “It is writ-
A formal ranch plan
forces all team members to agree to the past performance of the
operation and the future direction of the operation.
ten after all parts of the business plan have been completed,” he says. “This needs to be a stand-alone document that includes principal points of the plan. It should cover the information in the report in enough detail that the reader can quickly formulate a picture of the operation. Keep the executive summary short, not more than 1 to 2 pages long.” Farley adds that a well-researched business plan can
project ranch performance with a high percentage of accuracy because of all the accessed information needed to complete the plan. Production risk can be lowered with conservative estimations and market risk can be reduced with risk management. Kansas State University Extension economists en-
courage ranchers to plan for market disasters. There should be a fi nancial risk management plan that de- scribes steps to be taken to deal with fi nancial stress. Bevers says the downturn in the 2015 market came
after markets had hit record highs. Profi ts of $500 per cow were being enjoyed by many. Hedging price risk was not at the top of the list of marketing plans. Then
90 The Cattleman March 2016
prices started down. Feeder cattle futures prices — above $210 per hundred pounds (cwt) in May — closed the year at $150 to $160 cwt. “The downturn started slowly. Then someone opened
the gate,” Bevers says. “All things came together; heavier cattle, reduction in oil prices that hurt other commodi- ties, increased value of the dollar and other factors. If producers and stocker operators did not have price protection, they were hoping the bank didn’t call them. That’s why having some $20 to $30 cwt out-of-the-money put options may be needed to protect against a wreck.”
Seek expert help Putting together a business plan can be a chore,
whether it’s for a new operation or a seasoned one ea- ger to improve performance and effi ciency. Be assured there are experts available to help develop a plan that is best for your operation. Texas A&M AgriLife specialists, Texas Tech Univer-
sity, TCU and other universities and private consultants are out there. Farley notes that TCU spends 9 months each year training natural resource managers on how to develop successful ranch management plans. “Every subject taught inside the Ranch Management
Program is designed to teach the critical thinking skills needed for determining a plan,” he says. “The Ranch Management Program travels over 9,000 miles to 70 different livestock producers to gain years of experi- ence from lifelong producers to ensure confi dence in these plans.” Farley adds that with the huge fi nancial outlays
needed to operate and maintain as strong cow-calf or stocker operation, a solid ranch plan can help produc- ers lay out the information sought by the ag lender. “The lender wants to view the major production
plans of the business with conservative estimations of expenses and incomes,” he says. “The ag lender would also like to view a projected cash fl ow of the business until it is profi table.” Farley says that “bar none,” the biggest mistake
made by ranchers in writing a plan is to over-estimate their stocking rate and carrying capacity. “Secondly, they don’t use bearish estimations for
their marketing plan. Just be conservative all the way through the plan and ‘trust your numbers.’ If it will not work on paper, it will not work in real life. “Every plan you write will be better than the one
before. Learn from your mistakes and reduce your risk. But every business is going to require a step of faith for you to receive the rewards of the risk.”
thecattlemanmagazine.com
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