Key Performance Indicator #9: Total Investment (Market Basis) per Breeding Female
As we head into fall and start thinking about the fourth quarter, take another look at the health of your business. Are you in the black? Red? Do you know where you stand or are you muddling through and hoping for the best?
There are many ways to arrive at the answer. Stan Bevers, a long-time economist with Texas A&M AgriLife Extension Service and popular speaker at Cattle Raisers Conventions, has identified 13 of what he calls Key Performance Indicators (KPI) for Beef Cow-calf Operations. We have been looking at these each month.
Ranching is a business and like any business, the point is to make money. The challenge is always to reduce costs while improving the quality of the product. Operating under the premise that you cannot manage what you don’t measure, Bevers suggests running your operation, no matter what size it is, on the same basic principles as a Fortune 500 company.
While this may sound like a daunting undertaking, using the indicators will help you break it down into manageable action bites. There is also an excellent article, “Why Ranchers Need Managerial Accounting,” that addresses this aspect of ranching.
This month, we look at KPI 9 — the total investment (market basis) per breeding female. This number should be between $7,500 and $12,500.
According to Bevers, it starts with the land. “On most ranches, owned land is the major asset on the balance sheet. Currently, external factors have driven land prices higher. In today’s real estate market, ranchers are finding it hard for breeding cows to pay for any land purchase. Furthermore, potential ranch heirs look at the large investment, labor required, and low rate of return, and have to wonder whether it would be better to invest elsewhere.
The ranch manager’s job is to generate the greatest return on the lowest investment possible. This KPI target range, $7,500 to $12,500, takes into account that some land has already been purchased (or inherited) or that some portion of land the ranch uses is leased. To calculate this KPI, divide the total asset investment from the balance sheet by the beginning fiscal year inventory of breeding females.
Bevers operates RanchKPI, a ranch management consulting business, specializing in building ranch management information systems that allow for ranch accounting, analysis and finding efficiencies measured as Key Performance Indicators.
In order to have useful analysis, the data must be accurate, while also being simple in the data entry process. RanchKPI helps you target valuable production statistics and financial indicators, and gets you on track to meet goals and increase your bottom line.
To find more information about KPIs, what it takes to be a successful rancher, or to schedule a consultation, visit ranchkpi.com. ❚
“Total Investment” is excerpted from the September 2017 issue of The Cattleman magazine.