Imagine a couple on a quiet Saturday afternoon. They sit on a porch, enjoying a cold ice tea. A phone rings, and the wife, with brows furrowed, pleads, “Don’t answer it.”
The husband picks up and walks away, talking on his phone. The conversation is animated. He slaps his forehead and runs his fingers through his hair. His wife is already planning a meal for one. He returns, shaking his head.
“What’s wrong, dear?” his wife asks.
“I’ve got a few problems at work,” he says. “I have some fires to put out.”
Context is everything with this scenario. If you are a CEO of a publicly traded corporation, the fire may be an earnings report released on Monday that causes the stock price to drop. If you own a small business, your fire may be a manager with an emergency and now you have to cover the Saturday night shift. If you’re a farmer or rancher, odds are that your fire is a literal fire.
In my life, I have experienced fires with three pickups (two with trailers), two tractors, one loader, a haystack and a baler (it’s more fun when the fiery baler is your neighbor's). I’ve also seen millions of acres of rangeland go up in smoke.
“Putting out fires” is a phrase with a different meaning in business versus on a farm or ranch. Have you ever heard someone complain about “getting crapped on at work?” Unless you are a septic pumper, most likely you are ill-treated in the workplace. On the farm or ranch, cows and other farm animals will indiscriminately fling manure everywhere. Once manure becomes airborne, it will affix to everything, resulting in an unpleasant laundry issue. “Getting crapped on” is different when it’s on the farm.
There are some key differences between a business on Wall Street or Main Street, and a production agriculture business. Some people don’t view farming and ranching as a business at all. Business titan Michael Bloomberg famously described farming as process driven. “I could teach anybody, even people in this room – so no offense intended – to be a farmer. It’s a process. You dig a hole, you put a seed in, you put dirt on top, add water, up comes the corn. You could learn that.”
I would grant Mr. Bloomberg that farming is less complicated than a digital ticker tape. That digital ticker tape that Mr. Bloomberg created is also a process, just like farming is a process, but no one focuses on Mr. Bloomberg’s process. He is a businessman.
Back to the question, is farming a process or is farming a business? The answer is “yes” … it can be both.
We in production agriculture focus obsessively on our processes. We analyze inputs, develop a wide array of production systems, automations, productivity enhancements and genetic improvements. We measure yields and set up marketing schemes. But as Mr. Bloomberg astutely points out, this is a process, not business analytics.
If your farm or ranch balance sheet or income statement comes across one of Bloomberg’s digital ticker tape machines, would his analysts invest in your business? Would you invest in your business, or would you bury your money in the backyard? Perhaps a more poignant question would be, are your books in such a condition that you can analyze your farm or ranch as a business?
Every farmer can tell you how their specific crops yield. Most also track their revenues and expenditures. But how clean is your balance sheet? Could your accountant prepare a meaningful balance sheet? Do you know what your debt-to-asset ratio is? If the ratio is above one, your heirs can't pay your debts by selling your assets if something happens to you.
What is your return on equity? Do you have an estimate of working capital? Or do you only know you’re out of money when your banker tells you?
One commonality in farming and ranching is we love the process. We tell lies like we don’t have time to go on vacation, develop hobbies or a thousand other things that normal people do. In reality, to be in production agriculture, you must love the process – there are easier ways to make a living. What’s the point of owning a ranch if I don’t get to do cowboy stuff? Analyzing your business should be viewed in the same vein as manure management. Nobody likes doing it, but it has to be done.
There are always fires to put out on a farm or ranch – lightning strikes, cows breach fences and breaking a machine seems to be the only way to learn a machine. At times, all we do is put out fires, both figurative and literal. Our inability to analyze our farm or ranch as a business is an out-of-control fire. And maybe it’s time to put that fire out.
