Have you ever heard a rancher say, “I really ought to mange this place as though it were a business,” or words to that effect? Maybe you’ve even said something like that yourself. “… as though it were a business?” When we say that we are acknowledging that our ranch isn’t a business, but we should pretend that it is. Pretending isn’t sustainable.
Canada Revenue probably thinks it is a business, but that’s about the only group we can fool. Why should anyone really think you have a business, when you don’t think of it as a business yourself?
The bankers, lawyers, accountants and other professional people in town probably think you live the great life. They see ranches, not as businesses, but something they aspire to retire to. If you’ve been ranching for any time at all, you probably just feel tired, not retired.
So if your ranch isn’t a business what is it? Most ranches are collections of jobs. We own our job or, just as often, our job owns us. The label we’ve given to owning your job is “self employment.” I’ve heard it said that when you are self employed your boss is a lunatic! It’s not that everyone who is self employed is lazy; they are some of the hardest working people you’ll find. And it isn’t because they aren’t smart. They are plenty smart. It is because they work on the things that they are good at and that they enjoy doing, and those aren’t always the things that need to be done.
At Ranch Management Consultants, about three-quarters of our income happens in the winter. It used to just build up in the bank account in January and February and we would see it go down each month until the following winter. I knew better. I knew if I set up some short term accounts with the bank, I could make that money work for us by drawing interest. In fact, the first year I established the accounts we earned over $3,000 in interest. It only took 45 minutes to set up the accounts, but It took me two years to get around to setting up the appointment. I’d been too busy doing $10 per hour work to get around to what proved to be a $4,000 per hour job. Anyone who would let their employee get away with that is a lunatic.
What’s the difference between being self employed and being a business owner? In his best-selling book, Cash Flow Quadrant, Robert Kiosaki says that business owners ought to be able to leave their businesses for a year and come back to find it working even better than when they left.
At first take you might think that Kiosaki’s rule doesn’t apply to ranching. But it does. That it is so hard to imagine being able to leave the ranch for a year only reinforces that most ranches aren’t businesses. You may not want to leave for a year, but that’s not the point. It is one thing to be where you are because you want to be. It is quite another to be there because you have to be.
Several years ago David, a rancher who had enrolled in a Ranching For Profit School, called me to tell me that he had to cancel. He said that there were too many things happening and he just couldn’t get away. I told him I understood but I had two questions for him. First, if he stayed home, what would cause things to change? David thought for a moment and then said, “Nothing I guess.” Then I asked him, “Do things need to change?” After another long pause, he said he’d make it to the class.
When he got to the school I could tell he was still thinking about the work he’d left undone at home. On the second day of the school I asked the entire class, “What do you know is impossible to do, but if it could be done, would make a huge difference?” David answered, “To be able to leave the ranch for a year and have it still working when I get back.” That was three years ago. As I write this article he’s in the middle of a six month vacation to Australia with his family.
Ranches aren’t only a collection of jobs. They are also collections of assets. If I bought your ranch, I probably wouldn’t be buying a business. I would be buying a collection of assets. If I were to buy a business, I would be buying a collection of assets and a set of procedures for using those assets to make a profit.
Other than not being able to get away, what’s wrong with a ranch being a collection of jobs and assets and not a real business? Draw your own conclusions. Which would you rather own? A ranch:
Where the work is non-stop and you can’t leave for even a week at a time?
That requires off-farm income to make ends meet? That can’t pay people, (including family members, who after all are people too) a competitive wage? Where decisions are made without any previous planning so that drought, low cattle prices and other predictable phenomena come as surprises and catch you unprepared? Where there is no clear succession path for the next generation?
That made a $50,000 economic loss last year? Or a ranch:
Where the work isn’t constant and there is time for family, fun and vacations (and not every vacation involves going to a bull sale)?
That supports everyone who works on the farm by paying competitive wages?
That doesn’t require off-farm income?
That has reasoned policies and contingency plans for drought, low prices and other risks?
Where there is a clear path to bring the next generation into the operation?
That made a $50,000 economic profit last year? Doesn’t the second ranch, the ranch business, sound like
the better place to be? It supports a much better lifestyle than the first ranch. Ranching can be a great lifestyle, but the ranching lifestyle is at its best when the ranch is a busi-