Strategies for the Downturn

Boy, has the world changed in the cattle business over the last 18 months. Is this going to be a crisis or an opportunity for your ranching business? How you respond will determine the answer to that question.

How will you respond?  What are the strategies your business is considering? What is your process for evaluating different strategies?

If I were on the board of directors for your ranch, here is the information I’d want to know to make an informed decision:

What does our projected cash flow look like for 2017? With our anticipated revenues, will we be able to meet our obligations?

What are the five-year historical and, more importantly, projected economic returns for each enterprise on the ranch?

What is the mission and vision of the ranch? 

What is our competitive advantage? What are we especially good at?  Where do our passions lie?

With the answers to those four questions, we could start coming up with possible strategies and vetting these strategies to see which provide the most opportunity for the business. If you can’t answer those questions for your business, then you really are at a huge disadvantage to being proactive and creating opportunities out of this downturn.  It is going to happen to you, rather than you being in a position to act on it.

I was sitting in a board meeting a year ago, and there was a young man who had purchased some yearlings when prices were high and rode those yearlings down all year. He was, at that point, pretty far upside down on them. He was hanging his head as he described the situation, and you could feel the stress in his voice. My friend Wally Olsen was sitting in on this meeting and made what I think is a simple and yet profound statement. “The only thing that matters is what you do next.” Wally described how he, too, had been broke during the 80s but was able to pick himself up and look for the next opportunity. 

I think Wally’s words of wisdom are important in today’s market. The most important steps you can take to manage your business are the ones you are about to take. Maybe those in your business can’t answer any of those four questions. If that is the case, then what actions do you need to take so that those questions can be answered and you can start making plans moving forward?

I live a blessed life in that I get to interact with and learn from some of the best ranch business owners and managers on the planet. Many of these folks are excited about the current cattle market because there are new opportunities popping up that have not been attractive options during the past decade of unprecedented high prices.  Putting your head in the sand is the easy option.  Any business that chooses not to change is choosing to fail. 

So what is your strategy for managing the downturn? The best business leaders will surround themselves with other people, have the difficult conversations, welcome and then challenge all the ideas presented and then decide on a path that is well communicated. I hope your ranch business can find opportunities in this volatile time.