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Are You in the Right Business?

Are You in the Right Business?

Many farmers are working in the ‘wrong’ business, according to farm business specialist Peter Floyd. When asked what their business is, these farmers are liable to say ‘milking cows’, ‘fattening beef’ and even ‘keeping the bank manager happy’.

“If they focus on ‘milking cows’ the chances are that they will be successful at ‘milking cows’, but they may not make a worthwhile profit,” says Floyd.

“I believe that getting very clear on the business you are in is vital to success. If your focus is right, you are much more likely to achieve your profit goals.”

As an example of this Floyd cites one of his clients who used to see his business as a sheepfarm, but now views it as a factory for growing feed with the stock being machines for converting that feed into profit.

“When he changed his approach he found that emphasising on profit rather than production raised many serious questions about the way he ran his business. For example, what was the most profitable use of the pasture he grew throughout the year? There were many possibilities,” says Floyd.

“Using analyses he found, to his surprise, that some ‘machines’ were vastly more profitable than others at different times of the year. Once he knew how much profit he could make per day from each kilo of dry matter fed to each class of stock, decisions about what stock to run became easy and his profit rose dramatically.”

The key question for farmers is how to figure out the most profitable use of feed in their own, unique businesses, and the answer will be different for each business, says Floyd.

“It’s not rocket science, just good business. It does take some effort, but we now have smart tools available to do the necessary analyses and provide accurate profit forecasts on which you can base sound business decisions,” he says.


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