[Home] [Orders] [Support] [Manual] [Related Links] [Technical Info] [About AVS] [Link To US and WIN] [Press Releases]
CHAPTER 6: MANAGING WITH RANCH VISION
Having Ranch Vision does not automatically make you a great ranch manager any more than having a jet airplane makes you a great fighter pilot; however, the one makes it tremendously easier to be the other. Ranch Vision is a powerful tool that allows you to see where your ranch business is headed. It is designed to enable you to work as a team with your computer because it frees you to do what only people can do which is be creative while it does what computers are good at which is analysis. Through interaction with Ranch Vision you can begin to guide your ranch in the direction you want it to go.
Once you have entered your ranch into Ranch Vision, the next step is to identify the problems and opportunities facing your ranch. This is done by carefully scrutinizing the reports under the Current Plan menu. These reports provide you with a wealth of information about the direction your ranch is taking. They can help you identify upcoming problems in various parts of your ranch business including animal numbers, purchases, sales, grazing demands, enterprise gross margins, enterprise efficiency, replacement costs, cash flow, profitability, financial efficiency, solvency and so on. Every ranch plan is different and will have different strengths and weaknesses.
Carefully analyze your current ranch plan and learn what you can about it.
The goal of ranch management is generally profit maximization (or loss minimization) within the framework of certain personally established objectives concerning one's quality of life and the long term impact on the landscape. These latter objectives are very individualistic and will not be discussed here other than to say they need to be considered.
With regard to profit maximization we can see from the equation below that there are only two ways we can increase profit. We can either increase total gross margins or we can decrease overhead costs.
With regard to increasing total gross margins there again are only two ways this can be accomplished. We must either increase the efficiency of existing enterprises so they produce higher gross margins with the same inputs or we must expand the size of the business by either increasing the size of existing enterprises or by adding new enterprises. We are, therefore, left with only three alternatives for increasing profit.
INCREASE ENTERPRISE EFFICIENCY
Enterprise efficiency refers to how well an enterprise converts resources into gross margin. As was discussed in Grazing Requirements, page 198, the basic resource on a livestock ranch is grass. A rancher is really a grass farmer. After producing as much grass as possible he takes and converts it into something he can sell such as beef, lamb, wool, chevon or mohair. We will not discuss ways to increase grass production, but note that it is an extremely important consideration.
The best measure of efficiency for a grazing enterprise, therefore, is its gross margin per unit of grass. Ranch Vision reports this in the Current Plan menu in the menu item, Enterprise Efficiency, as the gross margin per Grazing Unit Month (G.U.M). This tells you how much money an enterprise will return for a given amount of grass consumed.
By analyzing the impacts of different management options, Ranch Vision provides a means for you to increase enterprise efficiency. Through Ranch Vision you can see how a management decision you are considering or that has previously been implemented affects the efficiency of one of your livestock enterprises. All you must do is identify the various effects that such a management decision could have or does have on the enterprise. Then look at the enterprise gross margin per G.U.M with and without these changes. For example you might be considering using a certain vaccine on your cow herd to reduce calf scours. If you know the vaccine will cost $1.22 per cow but should reduce your calf death loss by 50%, you can adjust your direct costs and weaned % accordingly. You then can see how to expect the use of that vaccine to affect the efficiency of your cow-calf enterprise by comparing the two different gross margins per G.U.M.
Ranch Vision can analyse virtually any mangement decision you are considering and tell you how to expect it to impact your ranch. Another way to increase the overall efficiency of your livestock enterprises is to eliminate or reduce the size of inefficient enterprises. This frees up the grass resource to be utilized by the other more efficient enterprises.
With Ranch Vision the only limitation on your ability to explore the possibilities of your ranch is your own imagination and creativity.
There are only two ways you can expand your ranch business. You can either increase the size of existing enterprises or you can add new enterprises.
Increasing the size of existing grazing enterprises is fairly straightforward if the grass resource is not currently being completely used. In that case you could choose to either purchase more animals or, in the case of breeding animal enterprises, reduce the sales of cull animals, open females or dry females or increase the number of females kept as breeding replacements or any combination thereof. Through Ranch Vision you can anticipate the effects of these types of changes on your herd sizes, purchases expenditures, sales, gross margins, enterprise efficiency, cash flow, profit, etc...
If the ranch is already consuming all of the grazing resource with existing enterprises then in order to increase the size of any of them you must first free up more grass. This can be done in one of several ways. You can eliminate or reduce the size of inefficient enterprises. You can acquire more grazing land through lease or purchase. You can improve the grass production on existing grazing lands by improving your grazing strategy or through irrigation, fertilization, seeding, etc...
All you must do is identify the effects that a management decision would have on the your ranch and adjust your inputs accordingly. With Ranch Vision you can see the effects of these changes on your ranch without actually implementing them. By spending time with your ranch in Ranch Vision, you can examine each of the alternatives available to you to find the best course of action for your ranch.
If you wish to add a new enterprise to your ranch business it could be a grazing enterprise or a non-grazing enterprise. Ranch Vision allows you to analyze up to eighteen different grazing enterprises simultaneously. These enterprises can be real, existing enterprises or hypothetical ones. In order to see how a new grazing enterprise would affect your ranch, simply create it. Of course, you can alter it and manipulate it however you wish. This allows you to explore an infinite number of alternative grazing enterprises and see how they might impact your ranch.
If you wish to add a non-grazing enterprise to your ranch, do so in the Additional Costs and Income menu item in the Ranch menu.
Ranch Vision places before you a model of your ranch; your challenge is to make it as profitable as possible. The only difference between this and a game is that the results are real.
Examples of overhead costs for a ranch include such things as rent, fuel, utilities, wages, repairs, depreciation on capital assets, insurance, professional fees, etc... Overhead costs are by definition costs that remain relatively constant regardless of production level. Therefore increasing or decreasing them has little impact on production, and every dollar saved on overheads means an additional dollar of profit. Overhead costs should be considered as "necessary evils;" the less of them you have the better. Wherever possible look for cheap, simple answers to your problems rather than expensive, impressive ones. For example, it is usually better to rent equipment for those occasional big jobs rather than to tie up your resources and increase your overhead costs by purchasing them.
Ranch Vision forces you to separate out your overheads so that they are readily identifiable. You can then concentrate on reducing them.
Also if you identify the effects, if any, that reducing an overhead will have on your production capabilities and adjust your inputs accordingly, you can see the resultant impact on your ranch business. Hopefully this will encourage you to reduce overheads whenever possible.
In addition, Ranch Vision allows you to see the effects on your ranch business when you increase your overheads through expenditures for capital assets. These are entered in the Additional Costs and Income menu item in the Ranch menu.
Excessive overheads are an extremely common problem for ranch businesses. Reducing them can be an easy way to improve your bottom line. A little time, thought and ingenuity could make the difference for your ranch.
Because a ranch typically receives income only a few times a year, it is critical that cash flow shortages be anticipated and planned for. This process is known as budgeting, and Ranch Vision makes it easy for you. Ranch Vision produces the Purchases Outflow report and the Sales Inflow report which give you a monthly breakdown of cash spent for livestock purchases and sales respectively. Ranch Vision also produces the Cash Flow report which gives you an annual cash flow breakdown for the next five years.
Every ranch is different having a unique combination of strengths, weaknesses and resources. In fact, there are literally thousands of different variables that combine to create the one of a kind situation that is your ranch. However, "blanket statements" are commonly made concerning ranch management that this or that should be done, as if every ranch were the same. While a few management practices are so favorable as to be applicable to almost every ranch, most are not. It is essential that you know how a management decision will affect your unique ranch situation. Otherwise you may implement things that are good for your neighbor but become costly mistakes for you.
Ranch Vision allows you to do an instant cost-benefit analysis for your ranch on any management option you have implemented or you are considering implementing. You must only identify the effects that a management decision has or will have and then look at the analysis with and without these effects. For example if you are considering a feeding program for replacement heifers and expect it to cost $15 per heifer but increase the conception rate in these heifers by 5%, simply make these adjustments to direct costs and pregnancy % and compare the resulting analyses.
Ranch Vision can analyse virtually any mangement decision you are considering and tell you how to expect it to impact your ranch.
Ranch Vision gives you the freedom to be creative with your management because it allows you to do these kinds of analyses so quickly and easily. This is exceedingly important because it is through innovation and creativity that you will find solutions to the problems and opportunities facing your ranch.
In the livestock business you must expect the unexpected. Price changes, droughts, storms, disease and more will affect your ranch business from time to time. Although you may not know when they will occur you can nonetheless plan for them and be prepared to act if and when they do occur.
Because Ranch Vision creates a model of your ranch you can quickly and easily see how unexpected events will affect your business simply by making adjustments to the model. For example, you can see how a drop in cattle prices would impact your ranch by adjusting your projection of the cattle market trend. You can see how an increase in predators would impact your ewe-lamb enterprise by appropriately adjusting your weaned %'s and numbers weaned. You could see how a shipping fever outbreak would affect a stocker enterprise by making adjustments to the mortality rate. By adjusting your pregnancy %'s you can see how a venereal disease in your neighbor's goat herd would affect your ranch if it were introduced. The possibilities are limitless. You must only identify the effects that an event might have and then look at the analysis with and without these effects.
Ranch Vision is a powerful tool for both short and long term planning. By using it to analyze your ranch you can see where you are headed before you get there. This kind of foresight is invaluable. It allows you to avoid mistakes with your ranch business. Where other programs look back at the past, Ranch Vision looks ahead to the future. Where other programs try to show you where you lost money, Ranch Vision prevents you from losing money. Where other programs try to show you where you made money, Ranch Vision shows you how to make more.
Through the process of Ranch Assessment, Profit Maximization, Cash Flow Budgeting, Cost Benefit Analysis and What If's, you can develop a strategy for your ranch that will help you avoid mistakes and capitalize on the opportunities facing you.
