As a business owner, would you like to do less work and make more money? That was the topic of a ranching seminar held in Green River on Dec. 13. "Our business (our ranch) must make unsubsidized profit; otherwise our ranch is just an expensive hobby," said Dave Pratt, owner of Ranch Management Consultants, Inc. Pratt was in Emery County promoting the Ranching for Profit School, which will be held in Moab on Feb. 11-17, 2007.
Pratt is a range ecologist by training, and has been teaching the Ranching for Profit School since 1992. "I can't teach you anything," he said. "But I can provide the opportunity for you to learn." He explained that the school is five days long and will focus on four main areas of successful and profitable ranching. One entire day of the school focuses on people. Those who work on the ranch will be studied. Another day will look at the production of a successful ranching operation. Ecology of the ranch will be the focus of another day's training. Two of the days at school will look at the economics of ranching.
"If your ranches are not fun and profitable, your children won't want them," said Pratt. "A rancher must understand all facets of the economics of ranching before any decision is made on the ground. It is easy to make a ranch fail, the challenging thing is to make ranching work."
Pratt went on to explain that the difference between people who are self employed and those who are business owners is how they use their money. Self employed people work for their money, business owners let their money work for them. He said this principle should be applied to the ranching business.
"A person who wants to have a successful ranch should consider their reasons for ranching. Many people have different reasons for getting into this business. After considering the reasons, a rancher must realize that the primary purpose for ranching is to serve a customer. Profit is not the primary purpose. Those ranchers who are not ranching to serve a customer will probably not succeed," said Pratt.
"If you are not making a profit, your ranch is just a hobby. Profit is a different thing to different people. Three things to be considered in determining the definition of profit are risk, return and repayment. If you want to make a profit, a clear understanding of economics must come first," Pratt continued.
Pratt explained that at Ranching for Profit, their definition of profit is: can you pay market rate rent for the land; can you pay full labor costs; are you receiving interest on your assets; are you paying all production costs; and are you getting a good return on your investment? If a rancher can say yes to these things, he is considered to be making a profit.
"There are many reasons a ranch is not profitable," stated Pratt. "All one has to do is look at his neighbor's ranch and analyze what he is doing wrong. It is always easier to see what someone else is doing wrong. Those same principles apply to all ranchers who are not making a profit. When you ask a rancher what his neighbor is doing wrong, the answer will invariably be poor management."
Following the Ranching for Profit School, those who attended, alumni, form boards to meet three times a year and analyze the ranching operations involved, and make suggestions for improvement. The group of ranchers will help each other through obstacles that may have been overlooked previously. Brainstorming sessions will produce a variety of solutions to everyone's problems.
"When you talk to a group of ranchers, their biggest complaints are about things they cannot control, such as the weather. Others are the price of fuel and the government. A rancher should concentrate on the things that are in his control and prepare for the events of the things he cannot control," stated Pratt.
"Profit is about security and giving back. Profit is not greedy. You cannot be generous with others if you don't have any money.
"Another thing a ranch owner should consider is separating work and home. This can be a very difficult thing in terms of stress levels.
"Is it possible to be 100 percent efficient and 0 percent effective. Some things in ranching need to be looked at differently to determine if you are doing things that are not effective. Increasing efficiency is not always cost effective.
"Successful businesses know the difference between working in the business and working on the business. A successful rancher must spend two mornings a week working on the business. Most don't spend time doing that now because they don't know how to do it. Once you know how to do that correctly, you will enjoy this time each week seeing your business grow.
"Ranches are businesses. A successful rancher will run his ranch like a business. A business is just like a three legged pot which is used to cook meals in. One leg is money, one leg is production, and one leg is ecology. If any one of these three legs is missing or shorter that the others, the pot will tip and the profit will leak out.
"Our goal is not to break even, it is to make a profit. Three things that must happen to increase profits are: increase turnover; decrease overhead, and increase the gross margin per unit. You need to build a plan to succeed and do better in your ranching business," concluded Pratt.
More information and articles written by Pratt are available at www.ranchingforprofit.com.