It’s often been said in one fashion or another that “if you are failing to plan, then you are planning to fail”. None of us like the idea of failing at something that we set out to achieve, and only a select few can afford to financially fail in a business enterprise. Whether we are starting a new business from scratch or just embarking on a new year, it is wise to look out from where we currently stand and create, as best we can, a vision of where we want to be and a plan for just how we intend to get there. In this five part series, I will review the basic components of the type of business plan we recommend for our clients.

                 II. Develop an Operating Plan:

What’s going to happen, when it’s going to happen and who’s responsible to make it happen are the key aspects of an operating plan. If visioning is the compass of the operation, pointing to where you want to go, then the annual operating plan is the road map helping you navigate through your current location.

The size and complexity of the annual operating plan is directly proportional to the size and complexity of your business operation. If the ranch is self owned and operated on a limited number of acres and has only one or two enterprises, then the annual operating plan will be short and to the point. The size of the plan however does not diminish the need for a plan. Remember, failing to plan is planning to fail. As a means of holding yourself accountable, we would suggest that the plan be in writing. A written plan with specific actions and dates for completion will help keep the operation flowing smoothly and provide a yardstick against which to measure accomplishments.

On a large ranch with multiple employees and diverse enterprises, a written annual operating plan is crucial. We generally divide our projects into groups by classifications such as Agricultural, Natural Resource, Infrastructure, etc. We then prepare a brief description of each specific project that will be accomplished during the coming year. The plan will be enhanced by a variety of addendums such as maps, budgets, a ranch calendar and a task list. The task list or action item list will briefly identify the project, the amount of money budgeted for it, the anticipated starting and completion dates and the individual responsible for the project. Providing a copy of the printed plan to each person identified with responsibilities in the plan will go a long way toward its acceptance and a successful outcome.

Of course the preparation of the plan is not in itself the objective. Having a road map in the glove box of the car will not do you any good if you don’t take it out from time to time and refer to it. Periodic review of the plan by the ranch owner or the manager will assure that the plan is being followed to the desired destination. Posting the action item list or reviewing it at regularly scheduled staff meetings will keep everyone on task. Marking off items as they are completed will acknowledge accomplishments.

The amount of time spent in the late fall or early winter in the development of the plan will be quickly returned in the busy spring and summer months when management and labor can move forward confidently with implementation of the planned items. If the beginning point, route and destination are well marked on the road map, the inevitable detour here or there will be easier to deal with and getting back on track more likely. Happy planning and safe travels.

However, leases must be entered with caution.  Too often, the owner and lessee have differing backgrounds, leading to differing understandings and expectations.  A written lease, which may initially seem onerous, enables both parties to clearly define the rights and expectations of each other.  Having a lease in writing allows both parties to engage in a common language.  The language of agriculture is foreign at first – terms such as AUM, N-P-K, pair, and disc need interpretation.  Written leases define terms and clearly state the purpose of the lease.  Considerations such as -Where will the cattle graze?  Who pays for improvements?  How much fertilizer should be purchased?  What crops can be grown? – can all be clearly stated in the lease.

Hand-shake agreements, while nostalgic, easily lead to confusion and dissatisfaction.  Ranch Resources can aid in the drafting of a written lease, lessening the burden for the property owner and providing reassurance for both parties as to the results and boundaries of the lease.

Black Bear

With modern technology it is amazing what is possible in the realm of remote cameras or more commonly known trail cameras. On several of the ranches we manage the owners are interested in seeing the unseen on their property. Seeing the unknown is now a lot easier with the use of trail cameras. For those who aren’t familiar, a trail camera is simply a digital camera that is set up with a sensor that when it detects movement it takes a picture. Thus every time it detects any movement within range of the sensor it snaps a photo. Most trail cameras are also equipped with some form of inferred or night time capability. On the ranches that we run trail cameras on it is unbelievable what we have caught on film.  Of course you have to spend a little time on the ground to find good locations to give yourself the best odds of capturing good pictures.

When we place trail cameras we have a similar mentality as a hunter. We look for funnels,

White-tail deer

food and water sources or anything else that may concentrate or alter animal movements. What gets to be a big challenge is when you have a target species you are trying to capture. It could be anything from a certain bird species to something as rare as a lynx or wolverine. What is fun is when you pick up your trail cam and find photos of species you had no idea were using the property. It is typically very surprising just how many critters use the properties that we would not expect. For a relatively small investment we can place a few cameras on a property and collect numerous species of wildlife. On one ranch in particular we have captured 57 different animal species in only a couple of years. Using trail cameras is a great way to enjoy the wildlife that you may or may not be aware of inhabiting your ranch.

Canadian Geese

When you sell pasture, you are literally selling pounds of grass.  We can predict the amount of grass a cow will eat in a day (cattle graze 3% of their body weight each day), and from this starting point, determine the total pounds grazed and charge a rate for it.  There are three main ways of measuring the pounds of grass consumed:  1) Head Months (HM), 2) Animal Unit Months (AUMs), and 3) Stock Days (SD).

1. Head Months.  Head months is a simple way of calculating grazing use by simply assigning a dollar value for each “head” of animal.  It is calculated by calculating the number of “head” per month.  For example, 300 dry cows for 1.5 months would be 450 head months.  The disadvantage is that the HM is often times arbitrary and historically or culturally set, depending on the area the grazing is occurring.  Of the three methods it is the least accurate.  Another disadvantage is that the value of a head month varies for each class of livestock.  A pair has a different value from a cow, from a bull, from a horse.  For example, I have a lessee who has 200 head of black angus pairs.  He wants to graze them for two months.  We have agreed to a price of $20.00/HM.  How much is the grazing revenue can I expect.

 200 head x  2 months = 400 HD

At $20/HM your total revenue is $20 x 400 = $8000

 A yearling would have a different HM rate from the pairs.  And a bull would be different, again.  If you have a lessee grazing several types of livestock, it gets complicated and requires agreement on each HM rate.

1.  Animal Unit Months.  AUMS were developed in the early 1960s as a way to standardize measuring grass consumption for grazing animals.  The basis for an AUM starts with a single 1000 lb cow.  A single AUM is the amount of grass this 1000 lb cow eats in one month.  We know that cattle will eat 3% of their body weight or in this case, 30# per day.  The AUM rate is then based on the value of this pile of grass the cow ate in one month, or 900 lbs (30lbs of grass in 30 days).  When grazing more than just a cow, you modify the AUM by the type of animal that you are grazing: a pair, a bull, a horse, and even elk, sheep and deer.  This “modifier” is called an “Animal Unit”.  For example, the AU conversion for a cow/calf pair is 1.32.   So, a cow/calf pair will eat 1.32 AUM’s in one month.  This equates to 1.32 x 30lbs of grass each day x 30 days – 1188 lbs of grass.   Calculating the total AUMs grazed is a matter of multiplying the number of head, the AU conversion, and the months grazed together.

Going back to our example, we have agreed to a price of $18.00 per AUM.  Our AU conversion is 1.32.  How much will he owe you at the end of two months?

200 head x 1.32 AUMs/month x 2 months = 528 AUMs

At $18/AUM your total revenue is $18 x 528 = $9504

This is very straight forward, but requires agreement on the AU conversion.  There are standards set from the original 1960’s research, but the leading disadvantage is that cattle are generally larger today than they were in the 1960s.  So, if I’m charging my lessee by the AUM consumed and they bring 1200 lb cows onto the ranch, they are in effect eating more grass (a 1200lb cows eats 36 lbs of grass a day) and only paying for what a 1000 lb cow will eat.  In effect, they are walking off with six pounds of grass and the land owner is not being paid for it.  Stock Days are one way of dealing with this issue.

1. Stock Days.  Stock days are the amount of forage one animal will eat in one day.  This is accurately based on the initial weight of the animal.  Essentially, a lessee will weigh his cattle before grazing begins (or you can both agree on a starting weight).  If the lessee brings on a herd of 200 black angus pairs, as described above, they would be weighed.  Assume the average weight of each pair is 1600 pounds.  We know that they will consume 3% of that weight each day, or 48 lbs of grass each day.  The equivalent to $18/AUM is $0.018/lb/month.  So, charging $0.018/lb for the 1600 lbs is $28.80/pair/month or $0.96/pair/day.      Going back to our example:

  200 head x 60 days = 12,000 stock days

At $0.96/pair/day your total revenue is $0.96 x 12,000 = $11,520

Some advice to those negotiating grazing leases:

1. Standard rates for grazing are based on AUMS and range from $16.00-$20.00 / AUM and depends on a lot of factors.  Know what is acceptable before sitting down with the potential Lessee.
2. Never agree to a price while standing out in the pasture unless you have extensive experience and can do a lot of math in your head.  It is always best to “get back with them” do the math correctly to be certain the compensation is fair.
3. Do not get the three different types of paying for grass get mixed up.  Very often, people will confuse HM and AUMs.  Don’t do this.  It could cost you thousands of dollars.
4. SD, while being more accurate is not widely accepted.  Sometimes it’s better to adjust the AUMs rate to simple accommodate for the larger animal.  This just takes a bit more math.

     It’s often been said in one fashion or another that “if you are failing to plan, then you are planning to fail”. None of us like the idea of failing at something we set out to achieve, and only a select few can afford to financially fail in a business enterprise. Whether we are starting a new business from scratch or simply embarking on a new year, it is wise to look out from where we currently stand and create, as best we can, a vision of where we want to be and a plan for just how we intend to get there. In this five part series, I will review the basic components of the type of business plan that we recommend for our clients.

     I.  Start with a Vision: 

A vision statement, a mission statement and a set of goals and objectives are all part of this vital component of the plan. Though at first glance, they may all seem the same, there are some distinct differences and each requires serious and thoughtful consideration. Contained within them are the long and short term hopes and dreams of each individual with a vested interest in the business. Also included are the nuts and bolts of the operation that serve as a compass, guiding the business to a successful outcome.

Working against the development of this portion of a business plan in the agricultural industry is a whole laundry list of excuses. “Well we can’t do anything about the markets”, “There is nothing we can do about the weather”, “The costs of inputs are out of our control”, “That’s the way we’ve always done it”, “That just won’t work here” and on and on. In spite of these difficulties or perhaps because of them, planning is critical.

The importance of this component cannot be over emphasized. Nor can the importance of including all the affected parties. On a family ranch, the parents, the on-ranch children, the off-ranch children and any long term critical employees should be included. On a company-owned ranch, the stockholders, investors and all levels of management must be present. It is counterproductive to develop a vision that is inconsistent with anyone involved and it will inherently set the business up to fail.

Given the value of this portion of the operational plan, adequate time and resources must be allocated to do it justice. Don’t try to cram it into a regular weekly staff meeting or hammer it out over coffee and desert after Sunday dinner. It is our recommendation that everyone be given adequate notice and information to prepare for the meeting, that prime time be specifically set aside for the purpose at hand and that if at all possible, an independent, third party facilitator be arranged to conduct the meeting and keep it on track. Experienced facilitators will understand the distinctions between the vision, mission and goals and objectives and will assure that they are understandable, achievable and measurable.

If the decision is made to conduct these meetings without the use of a facilitator, it is critical to do the necessary homework to understand the process and the most effective means to achieving the desired result. Brainstorming, open dialogue, and creativity should be part of the process. You will find that two shorter meetings will be better than one marathon session. If this portion of the business plan is not taken seriously, then the remainder of the plan is in jeopardy. The first attempt may seem awkward, uncomfortable and a waste of valuable time. However, if properly prepared and executed, subsequent refinements of this portion of the plan will come easily.  In the end, a well executed visioning session will serve as a solid base for the compass pointing toward success.

Fisherpersons tired of losing their line in a tangle of branches may curse willows along streams.  Yet, the value of the stream as fish habitat improves greatly with the presence of willows.  The aforementioned shading reduces water temperatures.  Also, by stabilizing banks and limiting erosion, willows help reduce water temperatures and provide cool holes for fish to gather.  The benefits of willows greatly outweigh the frustrations of tangled fishing lines.

Sandbar willow

Not all willows are created equally.  Just as in other plant species, succession occurs in willows.  Often, the initial species to colonize a sandbar or recently disturbed area is the Sandbar, Narrowleaf, or Coyote willow (Salix interior).

As an early seral species (one of the first species to establish), Sandbar willows aggressively inhabit an area.  This can be helpful when trying to stabilize an eroding area, and can be frustrating when managing vegetation.  Sandbar willows, as colonizing species, have relatively short life spans, making way for successive species.

A common successive species in southwestern Montana is Booth’s willow (Salix boothii).

Booth's willow

This mid-seral species provides increased stability compared to Sandbar willow.  It roots more deeply and has a longer lifespan than Sandbar willow.

Next time a willow establishes on a ditchbank or tangles your line, take a moment to consider potential benefits of having willows in that particular location.  The benefits may outweigh the inconvenience.

The Ruby Habitat Foundation is a strong advocate of pollinator projects. For those of you who are not aware the Ruby Habitat Foundation is a local nonprofit that was established with the goal of promoting the utilization of agriculture and the conservation of natural resources on the same landscape. Recently the foundation teamed up with the local Sheridan school district to help create pollinator habitats for the foundations latest project.

Miss Konopacki's Kindergarten Class With Logan

Miss Konopacki’s kindergarten class learned about pollination and the important role that pollinators play in the environment. They also learned about the different kinds of bee’s that are native to Montana and where some of those species prefer to nest. After a brief education about the different kinds of bee nests, the kids were joined by Mrs. Bank’s Advanced Biology class to construct and paint some bee habitats. The habitats were constructed out of wood and clay in an attempt to target several different native species nesting areas with hopes of finding numerous guests this summer.

Hard at work painting the clay box

As the season progresses and spring emerges the kids from both classes will be taking a field trip out to the foundation to help set up the pollinator habitats on the ranch. The will also spend some time in the field learning more about the vital role that pollinators play.

The Ruby Habitat Foundation is teaching by example in showing how it is possible to have a successful agriculture enterprise while maintaining pristine natural resources and enhancing specific habitats to allow for niche animals such as pollinators to flourish.

Mrs. Banks's Senior Advanced Biology Class Outfitted in Smock Attire

Perennial plots have some advantages over annual habitat plots.  Primary among them is that that they do not require the annual expense of planting and maintaining.  An established perennial habitat plot provides good habitat structure, and with some planning of species composition, can also serve as a decent food source for wildlife.

Some considerations in developing perennial cover plots:

Species Mix:  Perhaps your most important consideration is the mix of plants you are interested in.   As a general rule, simpler is better.  Selected species should include a variety of stature (high vs. low growing), growth form (bunch vs rhizomatous), and food value.  Including a forb in your mix is something else that needs to be considered.  Forbs (like a dryland alfalfa), support strong insect populations which in turn support a wide variety of wildlife.

Cleaning:  The most important step in establishing perennial cover plots is to eradicate the invasive species that likely infest the plot area.  The best way of dealing with this is to establish annual grain plots initially.  Through a wise use of farming and chemical application over a series of years, you can “clean” the plot of any undesirables, making the establishment of a new perennial stand more successful.   The key here is to not rush things.  Do not plant your perennial seed mix until you are confident that you have severely set back the invasive grass species.

Weed Control:  In addition to “cleaning” your plot prior to planting, you will need to control annual weeds that will spring up before your stand is established.  The type of control you choose plays into the seed mix you have chosen for your stand.  If you have a forb species in your seed mix, you will need to control annual weeds with mowing.  This can be very effective to giving your plant a good competitive advantage.  But, be prepared to mow the plot regularly.   If you choose to have only grass species, you can use herbicides to control the annual weeds.   Additionally, rapid growing cover crops can also be incorporated into the seed mix to provide protection to growing grasses and provides some competition to weed species.

Patience:  Depending on your grass mix, it may take several years for your stand to be established.  Be patient.  Native seedings can take five or more years before it is completely established.   In Montana, the key to rapid establishment is moisture.  If you use mulch in your seeding process and are able to irrigate the ground, establishment can be accelerated.

Maintenance:  Mowing (or grazing) perennial cover plots, on a periodic basis, keep grass healthy and productive.  Without mowing, grass can become rank and unproductive, reducing palatability and use by wildlife for wildlife.  If you do mow your plots, be sure to do it well after ground nesting birds have finished their nesting season.  Sometimes it is good to rotate mown areas so you can ensure that you have good standing material through the winter.

Thanks,

Logan

Imagine yourself in an unfamiliar setting, wanting to get from one location to another. Perhaps you are in a foreign county, confused by a different language, bombarded by new thoughts and unsettled by everything around you. If you had a choice, what mode of transportation would you choose? 

For myself in that situation, I would prefer the personalized services of someone that could chauffeur me directly to my chosen destination. I may not be very adventuresome, but I would rather travel in comfort, at a relaxed pace and with the assistance of someone who knows where they are going and that has my best interest in mind. Jumping on the subway or grabbing a train may get me in the general vicinity of where I want to go but rarely will it get me to my exact destination or do it comfortably.

For the new ranch owner, the situation they find themselves in is not dissimilar. Ranch ownership brings with it a different language, new thoughts and unfamiliar surroundings. It calls for someone with the expertise to assist the new owner in achieving their goals, i.e. reaching their destination. The purchase of a ranch property is a monumental decision and investment. Rarely is that decision made impulsively or taken lightly. The selection of the individual or company that will guide the fulfillment of the expectations associated with that decision is equally important. Over the years, we at Ranch Resources have come to appreciate that the personalized service and flexible attributes of a chauffeur-like approach to ranch management results in a high level of satisfaction for the ranch owner and avoids the disastrous consequence of unexpected results. Far from stepping on the train and being railroaded to a predetermined destination by an engineer with a singular goal, we prefer that our clients have the opportunity to express just exactly what they expect. Once goals and expectations are established, we work with our clients to determine the best means to arrive there. Give us a call if you are intrigued by our approach or if you are wary or weary of the train ride.