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How do you define profit? Then, how do you achieve it?

How to have a profitable cowherd

Throughout my career, I worked with accountants who had definite instructions from our owners to collect financial information that would allow them to accurately report “profit and loss” according to GAAP (Generally Accepted Accounting Principles) and to file an accurate tax return to the IRS.

To that, we managers insisted that we be presented with financial information that would help us make better strategic and operational decisions. Our desire was to accomplish this with one chart of accounts and a single general ledger. We couldn’t always make that work and sometimes we didn’t get exactly the managerial information or presentation that we would like, but it was good enough.

I was trained as an agricultural economist and have continued my relationship with farm and ranch economists to this day. Many economists will tell you that most ranches lose money nearly every year. They will also tell you that many are “lifestyle” ventures which are subsidized with off-ranch income. Hearing these kinds of discussions, after having managed profitable ranches for the better part of 40 years, disturbs me.

What is profit? Dictionary definitions, economists’ definitions and accountants’ definitions are not in complete agreement. So, who do you agree with, and how do you proceed? Let’s discuss a little.

One of the dictionary definitions defines profit as “an advantage or benefit derived from an activity.” We must recognize that many who own small ranches, and there are many, don’t mentally or emotionally do their accounting the same way a typical business would. For example, they put their own labor on the returns side of the ledger. Part of their fun in life or enjoyment is going to the farm after work and working with the land or the livestock. They don’t call that a “cost” but rather part of the return for their investment in the farm.

They also get a lot of dual use of equipment. The farm pickup is also the vehicle they drive to their off-ranch job while their spouse drives the family car. The four-wheelers or side-by-sides are used for family fun and also used for ranch chores. The same might be said for horses. To me, those perks can legitimately be considered as non-cash returns to the business. How does formal GAAP accounting deal with that?

I’m not ready to buy that most of these small farms and ranches are unprofitable. If we don’t count the owner’s labor and don’t take a full load of depreciation, fuel and repairs for the dual use of pickups, four-wheelers, side-by-sides, horses and other sources of enjoyment; I think many of them will operate without taking money from the family living accounts. Some may even contribute cash to the family living account. They should; and if they don’t, they need to manage better.

These small farms can be the toughest competition for full-time operations. Think about it:  they don’t care if the owner gets paid in cash for his labor. The enhancement to his/her quality of life is sufficient return.

Many of them are debt-free and operate simply. When full-time operators count costs the way they have to and pay themselves a salary or draw, the after-work farmers can be pretty tough competition. Some might even call that unfair competition.

However, I have no problem with it if they can run on internally generated cash and not depend on a continual infusion of cash from off-farm sources. Truth is that I have a real disgust for farm or ranch operations that are continually subsidized from off-farm sources if the land is paid for. They should, at the very least, be self-sustaining.

Ranch operations will not support large indebtedness. However, when you combine operating returns with land value appreciation on well-operated ranches, the combined returns will compare very favorably with or even exceed stock market performance if the land is paid for. I think it is wise to use excess earnings from any source to buy agricultural land. It is not wise to incur a lot of indebtedness (relative to assets) to buy land.

I have had a few consulting clients who had lost money for a number of years. Their question to me was, “Shouldn’t a ranch at least pay the property taxes and operating costs when it is free of debt?” They loved the ranch, but were tired of subsidizing it. My answer was always, “Yes!”

I don’t understand why anyone or any non-ag business would continue to subsidize any farm or ranch with money from family or business income that could be used for family or in a profitable investment. Ranches do not have to lose money.

Then there is the concept of “opportunity cost.” The idea is to charge yourself a market rate for assets and money used in the business, even if those assets are owned and paid for. Examples are land rent for the amount it could be leased out for, or to value your ranch-produced hay at market value or retained replacement heifers at market.

That begs some questions. If I sell this hay rather than keep it for my cows, how do I feed the cows and what would that cost? Or do we liquidate? If I sell my heifer calves rather than keep them for replacements, how do I replace cows and what will that cost?

The concept of considering opportunity costs is valid and should be considered. However, it should have no place in your accounting system unless your land is one business and the livestock and other enterprises are separate businesses.

It most often raises several follow-up questions for every opportunity cost question. To answer all of those questions usually requires significant fact finding and analysis. Opportunity cost questions should be asked and answered, but the implied alternatives should be considered outside of budget preparation. These questions are seldom easy to answer.

Bottom line—there can be several ways to define “profit.” However, if your ranch generates a positive cash flow year after year, the land is improving, your livestock and feed inventories are maintaining or increasing and you are taking care of debt service; it is profitable. In the meantime, I hope you pay yourself well in addition to just working for the fun of it.

Time is money: Take control of your day

AnnaGreen / ThinkStock Beef vet caring for calf


As veterinarians, much of our day is out of our control.

You get to the clinic in the morning, coffee in hand, thinking you’re going to Bang’s-vaccinate some heifers today. Next thing you know, you’ve done two OBs and a uterine prolapse, and your full cup of coffee is now cold.

Since the nature of beef practice creates challenges for time management, it is best for practice owners to create a system that allows them and their employees to use every minute of their day effectively.

Effective time management does not mean that the clinic is crazy-busy every second—that may actually be a sign of poor time management. It means there is a system in place that maximizes the income potential for the time available in the workday.

Schedule appointments

This system starts with the appointment book. Your receptionist needs to have a general idea of how long each appointment should take, so that doctors do not end up double-booked or have excessive downtime. There should be scheduled “overflow time,” which is a block of time during the day to allow for emergencies or producers who call that day. Train your receptionist to handle these activities, as you or your associates should very rarely be the person answering the phone and making appointments.

Also, you and your associates should be working with clients, which sometimes involves individual animal medicine. Traditionally, veterinarians made farm calls for individual animals, and the time spent driving from farm to farm generates little to no income. Operating a haul-in facility for all individual animal cases pays for itself, as you can see in case after case without the downtime of driving.

It also promotes a better work-life balance, as nighttime emergencies will occur in a familiar, well-lit, heated environment close to home. Obviously, non-ambulatory animals cannot be brought in, but these do not account for the vast majority of individual animal cases.

When driving is necessary, consider a “tiered farm call” charge. For example, you can charge $5 per mile for single animals, but your normal rate for greater than 5 head. This way, you pay for your driving time between farms without raising rates on your herd-work clients.

Fix ineffective clients

Of course, the most frustrating situations are not the farm calls nor the emergencies, but the clients who have little respect for your time. Arriving to a farm or ranch to see that the cattle are still out in the pasture or pen means you’re going to spend an hour waiting before you can start making money. Obviously, “manure” happens — but with certain people it is not a bad day, but a bad habit.

With these clients, ignoring the problem will NOT make it go away.

One option would be to give a specific expectation, such as having the cows sorted from the calves before you arrive. Let them know if this expectation is not met, you will have to charge by the minute instead of by the head. Often this conversation corrects the problem by your next visit.

If you are dealing with a client who consistently reschedules appointments, a similar method can be used. If they’ve rescheduled working the same group of calves multiple times, have your receptionist tell them that the next rescheduling will incur a $50 fee. Once again, this will most likely fix the problem without further effort.

If the problem is not fixed this way, don’t be caught bluffing — charge the fee. While you may risk angering the client, you cannot afford to continue to allow this client to leave holes in your schedule. Those holes create lost income, where during that time you could have been working other people’s cattle.

On the flip side, your efficient clients would appreciate sharing in some of the benefits of their work. You can offer to charge by time instead of by head — if they move the cattle that fast, it may save them money on your service charge.

Plus, this financial impetus to be efficient will give you time to use as you choose, either to see more clients or promote a better work-life balance. At a minimum, make sure to tell them you appreciate their respect for your time.

There are many other ways to promote effective time management. The takeaway is that you as the veterinarian need to control your day, not let your day control you. While the nature of beef practice can make this challenging, with a solid time management system you can navigate the storms of the workday to make the hours in that day count.


Jake Geis practices veterinary medicine at Tyndall Veterinary Clinic in southeast South Dakota, and raises cattle with his veterinarian wife, Carolyn, in northeast Nebraska. He can be reached at the

What makes a strong ag narrative?


The 2016 U.S. presidential election is behind us, but that hasn’t stopped the online bickering happening back and forth between Trump and Clinton supporters. The far left isn’t likely to give Trump a chance, and the conservative right has fingers in their ears to drum out the noise.

Everybody is talking and nobody is listening. Sound familiar? It should. The polarizing disconnect between one political ideology to another is eerily familiar to the widening gap between urban consumers and rural food producers.

If we look back on history and note the times where farmers and ranchers were oppressed, we would see cases like the Soviet Union. In a nutshell, simple agriculturalists were punished for achieving prosperity and successfully raising food for the nation. Consequently, when these food producers were pushed off the land and out of their homes and businesses, millions of people starved because there was no longer enough food to go around.

The cause and effect seems simple enough. Without farmers, there’s no food. It’s a rhetoric we’ve been harping on in the U.S. for decades, but since America enjoys an abundance of safe and affordable food, it’s hard to get our point across.

But seriously — would it take a famine for urban consumers to notice us? I certainly hope not. What agriculture does need, however, is a change in narrative. We’ve got the science, research and methodology down pat for producing safe, wholesome food for the world, but we can’t keep beating that same drum and expect to be heard.

We shouldn’t talk “at” our consumers. We need to talk “with” them.

So what does our consumer want to hear? I think they want a narrative. They want a story. They want to feel an emotional connection to where their food comes from.

We need to tell them about how our immigrant great grandparents crossed the pond in a journey to find success in the U.S. We need to share stories of covered wagon trains making the dangerous trek across the prairie. We need to describe the days of the Homesteader Act and the ways our ancestors tamed this wild land in order to carve out a living for themselves and their families.

We need to describe how each generation got a little bit better at producing food. Instead of just raising enough to feed one family; today one farmer can support 155! We need to tell stories of the first tractor grandpa bought. We need to share the changes that have been made on the ranch in the decades that have passed and how those improvements have helped the soil, water, livestock and wildlife.

We need to laugh together about the ideas dad brought home from college to implement on the farm. We need to share how a millennial and baby boomer get along and work side by side every day on the ranch. We need to show them how we practice environmental stewardship on a daily basis. We need to share pictures of our kids learning the ropes. We need to blast videos of our calves bellied up to the feed bunk. We need to share stories of our good days and our bad days and the lessons we learn from each. We need to detail what it takes to go from a seed in the soil to food on the plate.

There are many conversations we need to have with our consumers, but we need to meet them where they are, instead of expecting them to look at things from our point of view. They are hungry for stories. They want to learn more about where their food comes from. They want to know we are people they can trust. They want to know that we do our best to take care of the land and the animals.

It’s up to us to start the narrative. Make it effective by picturing what a day in their shoes might look like. Have a conversation that makes sense from the vantage point of New York City or San Francisco.

If we can learn one thing from this election, it’s this: yelling at each other while failing to listen and empathize with the other side just leads to further isolation and polarization. Only when we stop to listen, really hear what the other person has to say, can we start to make connections and have effective conversations.

If it feels like consumers are from Mars and ranchers are from Venus, it’s because we often lead very different lives. However, we all eat, and chances are we have more in common than we think. Find those commonalities and let’s start making a difference.

The opinions of Amanda Radke are not necessarily those of or Penton Agriculture.

Farm Progress America - September 26 2016

Farm Progress America - September 9 2016

How to manage your December cash flow

How To

December has different issues than November's cash flow; it's the time of year that your cash flow peaks but there are a number of other season-specific problems which stores face...

The holiday season provides a much need influx of cash into your business and cash flow worries seem to disappear. Nevertheless, the end of the year or first week of January is the prudent time for the savvy retailer to prepare for some upcoming bills.

Don’t forget these items while you are happily counting your profits...

The Landlord

Most retailers have triple-net leases on their location. As such, they are responsible for their share of any increased property taxes, maintenance costs for common areas and building insurance. It is a rare year when these cots do not increase. Most landlords, also looking to ease their own cash flow issues, will mail these assessments and bills at this time of year.

The Employees

Many companies, in the interest of easing their money problems at the end of the year, have year–end cash bonuses payable in the first quarter. Now is the best time to set aside the funds for these payments.

The I.R.S.

Though most retailers have been making quarterly estimated payments, it is now time to completely pay your tax bill. Penalties are significant and should be avoided at all costs. In addition, filing an extension can also become burdensome as the interest rate is also exorbitant. The I.R.S. will get its money one way or the other; best to pay them on time.

Chip credit cards: Retailers grapple with costly POS upgrades

chip credit cards

Shoppers love credit cards for quick and easy purchases. Retailers? Not so much. One big problem is fraud: Transactions with bogus plastic can drain significant sums from a merchant’s bottom line.

In a move to address security concerns, the card industry has introduced plastic with embedded chips highly resistant to counterfeiting. Even so, many merchants are delaying the costly investments required to upgrade their point-of-sale (POS) terminals to read the new technology.

“By late 2016, only 44 percent of U.S. merchants of all kinds had installed chip-reading terminals,” says Jared Drieling, Business Intelligence Manager at The Strawhecker Group, an Omaha-based consulting firm specializing in the electronic payments industry ( “And only 29 percent of merchants had activated such terminals to actually accept transactions.” 

And retailers specifically? The National Retail Federation reported that 48 percent of its members had upgraded their equipment by the middle of 2016. While the association said that most retailers were expecting to undertake the upgrade by the end of 2016, that rosy forecast was far from assured for a market that remains less than thrilled with the new technology. “Retailers are dragging their feet,” says Fran Howarth, senior analyst for security at Bloor Research, Amsterdam (

Smaller retailers are especially prone to delay.  “Larger merchants have the resources to become compliant with chip cards,” says Paul A. Rianda, an Irvine, Calif.,-based attorney specializing in the bankcard industry ( “While many smaller ones selling low ticket items may not care as much about the potential chargeback liability.”

Stop, thief

So what’s the big deal with the new chip cards? Thieves have become skilled at compromising the traditional “stripe and swipe” credit cards popular in the United States over the past several decades. That’s because the sensitive customer data stored in the magnetic stripe is easily duplicated.

“Crooks have been creating counterfeit cards by copying the magnetic stripe,” says James E. Dion, president of Dionco Inc., a Chicago-based retail consulting firm (  And the tactic is profitable. “Until the consumer discovers a suspicious transaction on a monthly report, and reports the matter to the bank, the merchant has no way of knowing the card is bad. That’s where the danger lies.”

The new cards, dubbed “chip and signature,” improve matters by storing customer data in a hard-to-duplicate chip instead of a magnetic stripe. New POS terminals read the chip and transmit a one-time-only code to the bank, which approves the transaction and returns an authorization. Because the transmitted data is invalid for any future transaction, criminals gain nothing by stealing it.

That’s a big change from the old stripe and swipe cards, where each transaction involved nothing but a straightforward check against a banks’ negative database. If no stolen number was discovered, the transaction was accepted. In the meantime, crooks could obtain customer data while it was being transmitted to the card processor or while it was stored on the merchant’s computer. Either theft can lead to compromised cards, causing inconvenienced customers to stop shopping at a retailer they no longer trust.

Retailer liability

If the new technology sounds like a good way to reduce customer ill will, there’s an even bigger motivation for retailers to upgrade: avoiding liability for fraudulent charges. “With the old stripe and swipe cards, merchants were not responsible if someone used a fraudulent card,” says Dion. The rules have changed. “Now the merchant without certified and tested chip-reading POS terminals is on the hook.” (Retailers’ liability for fraudulent transactions made over the Internet remains unchanged.)

Given the new liability rules, merchants selling high ticket items will be clearly at risk and will have an incentive to upgrade. Others may have second thoughts. “A merchant doing smaller transactions, say $50 or less, and who maybe gets fewer than a dozen bad transactions a year, may be okay without upgrading to chip card capability,” says Dion.

Even so, retailers currently seeing no fraudulent activity need to carefully consider the potential for a dangerous change in the security environment. “Now that the window of opportunity is closing at merchants who have upgraded their hardware and software, criminals must hunt other targets,” cautions Drieling.

Such as? So-called “card not present” transactions made over the Internet, where customers present no physical card, are expected to experience more fraudulent activity. And many smaller and mid-sized merchants who have not upgraded their POS equipment because they previously experienced little fraud may also become targets of crooks who realize they can get away with using counterfeit plastic. By the time the fraudulent transactions are discovered, the cooks are long gone. And the retailer is on the hook for both the lost merchandise and the transaction money.

Costly delays

Of course, it’s difficult or impossible to quantify the potential costs of a change in a retailer’s risk profile. And against that uncertainty, the merchant must weigh what can amount to a significant financial outlay to get new equipment installed. “One terminal might cost you a few hundred dollars,” says Rianda. “But if you have a whole system that needs to be replaced, you might need to spend tens of thousands of dollars.”

To that, add the time required to negotiate with equipment vendors and make sure the new system is working correctly. “Bear in mind that the transition can be complex and time consuming,” says Drieling. Merchants must not only arrange to have the equipment installed, but must also have the hardware certified and then tested.”

Therein lies delay. “There was a big rush early in 2016 to get terminals installed, and things got backed up,” says Drieling. “That in turn led to bottlenecks in the certification and testing process with merchant processors. Medium and large sized merchants have had an especially challenging time because of customer rewards and other programs integrated with their POS equipment.”

Even retailers who got an early start on the transition ran into unexpected issues. “Merchants who saw this change coming a couple of years ago specified chip card upgradeability for purchased or leased credit card terminals,” says Dion. “Even with those terminals, though, the ability to take the new cards requires a pretty significant software installation, and some hardware simply did not have sufficient internal memory.”

There’s still another reason retailers resist the new system. As any shopper knows, the new technology causes delays at checkout. “The POS terminal reads the chip, generates a one-time only security code, and then sends that code to the bank which certifies the card as real or counterfeit,” says Dion. “That can take up to 15 to 20 seconds. That’s a long time compared to the old quick swipe, and it’s a big concern at high volume retailers.  The card companies are working on enhancements that will speed up the handshake and the approval process.”

Signature versus PIN

There’s one more reason to resist an upgrade: Another costly investment may be required down the road if the card industry opts to switch to a so-called “chip and PIN” system that requires customers to verify themselves with a numerical code rather than a signature.

Used throughout much of the world, chip and PIN has the great advantage of making it much tougher for a crook to use a lost or stolen credit card. A thief would have to know the secret PIN code, rather than scrawl an all-too-common illegible signature to facilitate a fraudulent transaction. “Why we didn’t go chip and PIN right away is a real head scratcher,” says Dion. “There is only a very slight difference in the hardware. Ultimately the industry will go that direction, because merchants are not trained to be handwriting analysts.”

Not everyone agrees that chip and PIN is sufficiently better to justify the cost. “There are good arguments on both sides of the table,” says Drieling. “Chip and signature may be a better transition because not all merchants have a PIN pad, and getting one means additional cost.” Additionally, customers may resist using PIN cards because of the need to remember numerous PIN numbers for all their cards.

Too, the upgrade cost may keep the industry from shifting to a chip and PIN system. “After experiencing the headaches of the current transition, merchants will not want to revisit the expensive and time consuming terminal refresh process five years down the road,” says Drieling.

Even if the industry were suddenly to shift to all chip and PIN cards, merchants would still be on the hook for any losses incurred for transactions made over POS equipment that has not been upgraded to read chip cards. And there will always likely be some merchants who do not upgrade. “Cards will still need to have mag stripes for use at merchants lacking chip readers,” notes Drieling. In such cases, criminals can still conduct fraudulent transactions with nothing more than a scrawled signature.

Mobile future

Despite all the controversy, arguments about the new technology may be moot a few years hence. Many retailers have already started to invest in the next level of digital transactions: mobile payments. The move is driven by consumer preference: “Customers have become accustomed to using Google wallet and Apple Pay,” says Dion. “Their mobile devices are extensions of their arms.”

Many observers expect mobile payments to become the dominant transaction method over the next five to 10 years. “By that time,” says Drieling, “merchants might well be asking themselves, ‘Do we need a chip terminal at all?’”

In the meantime, though, retailers must continue to grapple with the shift to the latest forms of customer protection and transaction processing. The risk of liability for fraudulent transactions must be balanced against the time and cost required to upgrade equipment and the need to plan for additional improvements down the road.

Even so, the decision to upgrade POS equipment may depend less on these fine points of analysis and more on consumer pressure. “Customers judge merchants partly by their level of technology,” says Dion. “Even though customers are not liable for fraudulent transactions, when they see outdated POS equipment they are likely to ask themselves, ‘Why is this merchant not protecting my personal data?’”