Author Unknown Webster's New World Dictionary states: "thrify implies industry and clever management of one's money or resources" "frugal stresses the idea of saving and suggests spending which excludes any luxury" "sparing implies such restraint in spending as restricts itself to the bare minimum" "ecomonical implies prudent management of one's money or resources as to avoid any waste in expenditure" "provident implies management with the foresight to provide for future needs" Each of these stated "definitions" should be a significant cord in the "braided rope" of The Sustainable Shepherd's financial management. Structured to Lose Ranching consultant, Stan Parsons, has siad that most U.S. ranches lose money because thy are structured to lose money. He states, "So much emphasis on production and fossil fuel usage causes 'profit' to be unlikely." In much of agriculture, we have been content ot have profit as the portion left over after paying "out of pocket" expenses. Peter Drucker, managment guru and author, defines profit as "the return of capital no longer needed for growth." Investment capital must be repaid before profit exists. Allan Nation, Storkman's Farmer editor, reminds us, "It is the egg that hatches the chick." Many in agriculture are consuming the seed for next year's crop. "Sustainable" Shepherd Economics Some financial considerations for you to ponder: 1. Don't Follow Lead I'm reminded of a vocational agriculture teacher who was being quizzed by a freshman student about making a living on a farm. The teacher's advice was "Find an enterprise few are willing to choose and do (perform) it better than most others in that enterprise." The teacher further explained that "better" meant "more production for less cost." I feel that sheep production is now at this point. 2. Invest in Tomorrow A definition of profit that i appreciate states that "Profit is what remains when all expenses have been covered and an ivestment in tomorrow has been made." Many producers seem to measure profit by what remains after direct (variable) expenses have been paid. To see the results of this definition, look at the farms where buildings are deteriorating, fences are nearly nonexistent, pastures are now brush-covered, etc.-- no investment in the future. Profitability equals sustainability. 3. Create Wealth Wealth is created by adding value to a resource. For grass producers, "useless, worthless" grass is converted into an "edible, valuable" commodity-- meat and wool. Our wealth increases because a commodity (ewes and lambs) has increased in size and become a "useable" protein source. When our profit depends on a price increase, we will experience financial loss about half the time. Supply and demand economics dictate that a commodity sells near breakeven. 4. Minimize Deprecialbe Ownership If an item rusts, depreciates, or requires major off-farm inputs (repairs, fuel, etc.), the long-term economcs are breakeven at best. 5. Major Investments Should be Appreciable Major investments must be increasing in value. On a forage farm, growing and reproducing livestock top this list. Truly profiatble farms tend to have a "threadbare," functional appearance. The fancy "trim" is for museums. 6. "Effort-Effect" Management 90% of our efforts only increase production 10% and vice versa. Choose carfully where you expend your efforts. Our management and labor efforts should be geared toward increasing the effectiveness of our livestock "harvesters". 7. Be Flexible When you feel the warmth of the breath of many following, keep an "eye out" for opportunity. Those of us who are still profitable and are doing the same management we did 10 years ago are either fortunate that few see your opportunity or may not be counting all costs. Profitability is not stagnant! Don't change for change sake! Don't be married to anyone/anything but your spouse!!! Try it, you'll be pleased with the results. Remember-- find something your neighbors don't do (raise sheep). Do it well. You may be able to "hire out" your pasture renovators to your neighbor so he can continue his prestigious "Land and Cattle Company." |
This page was last updated on: January 7, 2005
The Sustainable Shepherd |
The Lambinators 4-H Club of Scioto County, Ohio |
