by Dave Pratt via Ranching for Profit Blog
I’ve always felt that it is important to care about at least one thing in your life that doesn’t matter. For me that’s baseball. There are parallels between baseball and business. With spring training just around the corner, I’m using the next few ProfitTips to do a little spring training of our own to highlight some of those principles.
In baseball you play to win.
At the beginning of the baseball season, whether you are a big market team or have the smallest payroll in the league, every team has the same goal: to win the World Series. Even half way through the season, if a team is out of contention, they still play to win. They take calculated risks and continuously try to improve.
In ranching we play not to lose. That’s why we focus on the break-even point, rather than a profit target. I joke with people that if the idea of “Ranching For Profit” is too radical that they can change it to “Ranching For Less Loss.” But it’s no joke. That’s the way most of us think. We tend to follow the same strategies over and over even if they haven’t been successful. Each year we try to implement the strategy with greater efficiency. But it doesn’t matter how well you do something, if it is the wrong thing to be doing. As a result, we resign ourselves to supporting our unprofitable ranches with off-farm income or under-paid family labor.
Switching sports for a moment, in football when a team is ahead by a couple of touchdowns in the 4th quarter, they often start playing “prevent” defense. In the prevent mode they let the other team complete short passes, trying to avoid a big play and counting on time running out before the opponent can come back. Why don’t they start the game playing the prevent defense? Because they know you can’t win by playing not to lose.
Regardless of whether they are playing to win or playing not to lose, most ranchers are losing. If you don’t include the appreciating value of the land, the average ranch in North America has a negative Return on Assets. (Many ranchers would be more profitable if they leased the land to someone else!) If we can agree that losing money is bad, and if the average ranch is losing money, then the averages for the statistics we keep in ranching are benchmarks for bad.
If the statistics for our ranch are above the average, all we can conclude is that we are better than bad. Better than bad may mean that we broke even or that we only lost $1 instead of $2. Either way, better than bad falls far short of good.
There is a difference between playing to win in sports and in ranching. In sports, if one team wins the other has to lose. In ranching, success on one ranch does not require the failure of another. In fact, it’s just the opposite. The more of us who win, the healthier our entire industry will be.
- Managing the Ranch as a Business: The One Square Yard Ranch (landandlivestock.wordpress.com)
- Getting Into the Cattle Business: Buying a Ranch and Making it Pay (landandlivestock.wordpress.com)
- Cell Grazing: Part VII. How to Get Rich on Drought and Bad Cattle Prices (landandlivestock.wordpress.com)