Expert: 'You're running a business'
Ranchers need to change their mindset to focus on business angle
By CRAIG REED
For the Capital Press
ROSEBURG, Ore. -- A rancher needs to consider himself to be a business operator first, a management consultant says.
"You're running a business," said Dave Pratt, owner of Ranch Management Consultants, which operates the Ranching for Profit School in North America. "That's an entirely different thing than working a ranch and raising livestock."
Pratt, whose consulting business is based in Fairfield, Calif., told the Douglas County Livestock Association's spring livestock conference that too many ranchers look at their profession as a job rather than a business. He said if that thinking can be changed, ranching can be more profitable.
"You won't do things differently until you see things differently," he said. "Farming and ranching can be more profitable. Some people are doing it, so it can be done."
Pratt said he understands many ranchers are in the profession for reasons such as the lifestyle it offers, they like being their own boss, it's a great way to raise a family, they love to be around livestock and they prefer working outdoors.
But he said ranchers could help their profitability by thinking of themselves as business people.
He presented some ideas to begin making that change.
* Know why you want to do this.
* Accept ranching as a business.
* Make sure you work on the business, not just in it. Have a strategic plan.
* Know your numbers -- gross margins and overheads -- and keep them under control.
* Know what your numbers mean, know what you're going to do next if prices crash. Have a contingency plan if there's an emergency.
* Work on relationships, not just with your partners, wife and kids, but work to solidify relationships with the people you're leasing land from, people you're grazing cattle for, suppliers and any others. That takes effort.
* Design a business structure that's in synch with the environment so nature does most of the work.
"He asked us why we were in ranching ... profit never entered our discussion," said Veril Nelson, a rancher from Sutherlin, Ore. "The thing we're weakest at is the economics aspect of ranching, planning for expenses and income. He emphasized we need to fine-tune those numbers."
Elissa Thau, a sheep rancher in the Dixonville, Ore., area, said the workshop reminded her to be more attentive to details.
"Evaluate why you do everything the way you've been doing it," she said. "He (Pratt) made a very valid point about trimming away the deadwood that's not producing a profit."
Pratt said North American ranchers are the most productive but the least profitable in the world.
He explained that since 1970 the cost of ranching inputs has risen five times faster than cattle prices. He said too often ranchers use excuses such as government regulations, low prices, drought and too much rain for not making a profit.
"You need to make the transformation from being self-employed to being a business owner," he said.