Making money with land and animals

AGRIBUSINESS | 05 MAR 2018

If your goal is to make money in ranching, that’s great! It’s completely possible. In any profession, it takes several years to become an expert. By this time, this means you’ve figured out most of the opportunities for loss and you know how to be profitable. Does this mean it takes a decade to have a meaningful return on your time invested? No. To actually make a profit though, you have to know your costs. All your costs. Typically, it’s a very important financial exercise to understand your operating income (earnings before interest and taxes).

Can your business actually pull in enough revenue to pay for its normal expenses? Aside from your capital investment (vehicles, structures, equipment, etc.), what ongoing supplies, feed, and labor do you need to keep everything running? Some operations make important tax decisions such as purchasing new equipment to offset expected high tax liabilities at the end of the year. This can be a good business practice, though it can result in acquiring too many assets that lose value over time and cost you enormous interest over the years. If purchased with cash, this means you’ll have less available money to make emergency decisions for your business and will affect the way the bank perceives your risk. Animals can be capitalized as a long term asset in some cases which means you only have to realize a certain amount of their costs from year to year. Making a profit is not essential to enjoying ranching and farming, but knowing where you stand will help you price your product appropriately!

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