Working Cow podcast,
episode 372.
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Welcome to the podcast that gives producers a
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Practices that have increased the effectiveness of their
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Howdy do everybody's? It's clay Henry, host of
the working cow podcast recorded exclusively in the
understanding eggs studios,
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Very excited to be joined once again
by
Dallas Mount. Dallas is, of course, the Ceo
of ranch management consultants, and they are
the, fine p
of the ranch for profit school and the
executive link program among other things.
And, we're gonna talk to him today as
he's been owning a business now after spending
many years telling ranchers to run their ranches
like a business.
Now he's been in the driver's seat of
a business for a number of years.
And we're gonna talk to him about some
of the things that have helped him
as he's been guiding this business. Some of
the
lingo, some of the ways of thinking about
things, the mindset and the way that they
think about, the different
opportunities
available to them,
and analyze them and and some of the
things that have helped him just lead that
business all the more better. So, Dallas, thanks
for joining me again on the Working cow
podcast. Welcome back. Thanks, Clay. Always fun to
be with you. Yep. We're just continuing to
to
blow Brian Alexander's number of times on the
working couch podcast out of the water. So
I was thinking about that the other day.
I probably should have him back on because
he's he's probably getting a little
a little jealous, but
it's always fun to beat, Brian, Alexander and
something. Something. Yeah. I can't beat him in
the beard department. That's for Dang sure.
Neither.
So 1 of the things ranch reboot podcast
podcasts, by the way, shout out to Brian
Alexander.
I... 1 of the things that, you know,
actually what inspired it is as I was
preparing to be on
Jared Sore profitable
regeneration,
profitable stewardship podcast.
I I was listening to you. On there.
And you were mentioning some things
on there that have been kinda helpful as
you have been managing
ranch management consultants.
And,
you know, just some of those ideas of,
you know, now you've been teaching ranchers to
look at their ranches as a business for
all these years. Right? Even back to your
time with extension,
and
you know, some of that. So you've been
teaching Ranchers this for a long time, but
now you are also a business owner and
making some of those decisions
that affect your own personal bottom line as
a business owner. And I was just kinda
wondering
how has that changed your perspective?
On the way you teach has it... Hasn't
it changed anything significantly
in the way that you teach these things
some of those things. So that's kinda where
I'd like to go for this. So I
guess we'll just start there... What has changed
or has it changed anything
being in this business owner role for the
last couple of years.
Yeah. Cool. Good good question. Clay. Well thanks.
Boy,
It it's changed it and it and it
hasn't changed Right? I mean, I've I've been
teaching this stuff for for 20 years, but
I'm looking back to my university time. I
I think what it's done is it... It's
allowed me
to
understand the...
When when you're walking the walk as well
as talking to talk, it's different. Right? You
know? And when I... When I... And And
I'm... I don't mean in this derogatory terms
it against people that that are employees. But
when I was an employee with the university
while wyoming owe. Right? I I would go
out and teach teacher stuff, and I would
get a paycheck whether I was good or
whether I wasn't good. Great? I mean, you
know, if if I was was terrible at
doing my job, I probably would have got
about the same paycheck as as the fact
that I... I was pretty good at doing
my job. When when you're
when you're stepping out on your own, and
you're you're making your own way in the
world. I think there's a...
There's another level of that where... Okay. Now
it's you know, it's my own money on
the line.
It, you know, if if this thing's gonna
work or this thing is not gonna work.
It's it's gonna be highly dependent on my
abilities as a business owner as a business
leader to to structure and run this thing
in a way that that works. Right? And
And so I think it became...
These things that we talk about became a
lot more real. Right? When it when at
the end of the day, it's it's me
having to make sure I I develop my
own paycheck. Right? And the... And also the
people that depend on depend on us it
depend on me. So yeah. I think they...
It's... You know, the things we talk about
are largely the same, but I think I
can talk about them now with hey, This
is what we do. Right? And not just...
Oh, I read this in a book or
heard this is a good idea. Right?
We're... It's probably where I was coming from
10 years ago. Right. You know, and it...
It's that
idea of the difference between signing the front
of the check and the back of the
check, you know, when you go from being
the guy who's just signing in the back
of the check, to the guy who's now
signing the front of the checks, multiple checks,
and there's other people whose livelihoods
depend on you and and your ability to
continue to
see the way forward with this business. It
it just some things have to change. Right?
It's not right or wrong. It's just... You've
got approach things differently now. Right? Right right.
Yeah. No. That's that's that's exactly. And I'll,
I'll tell a little story that I've been
telling it Ranch
to some people probably probably heard me say
this, but,
You know what when I when I first
bought Rm,
I liked doing individual ranch consults, and, you
know, I'd get a lot of phone calls
of You know, hey, Dallas, can you come
out to the place for a couple days.
Let's let's work through my economics. Right? Like
can you have... And I'd say sure. Let's
let's look at the calendar. Let's pick a
date, You know? And it's probably a ranch
that would mean a day's worth of time...
Day's worth of travel time to get there
you know,
2 days on... And then a day we're
with a travel time home. Right? So was
it was a 4 day commitment.
And and people would say, okay. Well, what
do he get charged for something You know?
And I'd kinda look around and say, well,
you know, hey heck, here's here's what the
other people are charging. So, I mean, let's
let's pick a number, You know, 1500 dollars
a day or something like that. Right? So
so that I'd I'd go... It's been 4
days, and I'd send the folks bill for
3000 bucks. Right? If I was there for
2 days.
Well, 1 of the things I did when
I bought this company is I looked at
my overhead costs of keeping the doors open,
and ranch management consultants. Right? So if we
took our our salaries for the everybody that
works here, you know, keeping the lights on
in the building the building rent. Right?
My obligations to to Dave, to to meet
to meet what I owed him for purchasing
the company. So so these are the cost
just just to keep the lights on before
we actually do any work. And if I
took the number of working days in a
year
and divide it into that. So so let's
say, I can't remember what number was when
I bought the company. But let's say 400000
dollars.
Right? And then let's look at the number
of working days in a year. Which is
pretty close to to 365
days. Hot 3 65.
Right?
Yeah. Everybody also thinking 3 65.
No. Let's look cover what days if you're
a reasonable person. Alright?
So, you know, if you take bigger weekends
and some holidays and some time Right? 02:50
is a pretty close number to use. Right?
So,
400000
divided by 250.
I mean, if it were 200 working days
in the year, the math easy Right? 2000
dollars a day.
And and Now, you know, my number was
maybe, you know, 17 50 something like that,
whatever it was. Mh.
You know, that would kinda slap me across
the face. Right? Look, if
it's my job at leader in my business,
to structure our business that, you know, every
day, we're producing more than that in margin.
Right? You know? So, I mean, that... That's
a that's a pretty big big slap in
the face. So, you know, these things that
I enjoy doing that that feel like they're
really good at value. I mean, you know,
1500 dollars a day act. That's good wages.
But when you've chosen to structure a company.
I mean, I've chosen to buy Arm c.
Right?
I've chosen to structure a company that has
this level of overheads,
I've that by doing that, I've now got
to focus my time on creating things that
actually of the needle. Right? And and Out
I see a lot of people who we
work with, ranches.
Right? I mean, what what are the what
you look at most ranches? What... What's their
daily burn rate Right? How much money did
they go through a day? And a lot
of ranches it's 2 to 3000 dollars dollars
a day?
Is if you take the total amount of
money leaving the business divided by even 3
65.
Right? There's... And and so it's your job
as a leader of your business to
structure it so that you, you know, that
that business is creating significant value every day.
Right? And I think so many times we
get caught up in that, you know,
Oh, I'm gonna save a hundred bucks by
doing this. Well, you know, slap yourself across
the face. Right? Because a hundred bucks isn't
gonna move the deal. But, you know, your
your job to create significant value in your
business.
Yeah. Yeah. For sure. And and those things
kinda change over time too. Right? I mean,
as as things progresses, things grow
as a business matures, maybe,
those things are going to change
what that ratio looks like. Is that true
in your experience?
Abs absolutely. I. I like to think... There's...
So most of us in in Ag and,
you know, that that are kind of
entrepreneurial by nature. That wanna build something. Right?
We we start off early in life and
early, you know, maybe in your twenties.
You, what what you have is you have
your ability to get out there in hustle.
Right? And to and to physically work and
to physically do it. Right? And and that
set of skills
takes you so far.
Right? But then there is a point where
those skills can only take you this far
and in order for your business to grow
or, you know, depending on what you wanna
do. I mean, maybe some people are very
happy just having a very
simple life. Right? And and there's nothing wrong
with that at all. But a lot of
the people that we talk with, what to
build something that's bigger than themselves. Right? Wanna
build something that can involve others,
that get they can grow and continue to
do... If that's what you want, then at
some point that
that strategy of
hustling,
working in it. I can do it all
myself. I can figure out how to fix
this stuff. Right?
That strategy only take you so far. And
then you have to adapt to change. Right?
And that... And that's a very hard thing
to do. That that was very hard for
me. I'm I'm frugal by nature.
And if I can do something myself instead
of hiring somebody to do it, that was
always my default. Right? You know? I mean,
you just think about things around the house.
And you, you know, things with your vehicle
and things outside. Right? When when something breaks,
it was my nature too... Okay. I'm gonna
figure out how to fix. Right? I'm not
gonna take it to town and pay somebody
to do it. I'm gonna save, you know,
a thousand bucks by fixing this myself even
if if it takes me a week. Right?
Well, you know, that that'll help you when
you're starting out and you're broke,
but at some point, you've gotta change that
full. Philosophy if you want to turn this
thing into something that's that's bigger than yourself.
And and that... That's a... That's been a
hard adjustment for me. It's, you know, it's
it goes against my
my natural nature and, you know, goes against
my
propensity to be frugal.
So Yeah. Well, and... I've had to be
intentional. So A couple of different things to
think about there that I think kinda help
frame this is, like, if a billionaire,
stops collecting interest on his wealth for the
amount of time it takes him to bend
over and pick up a hundred dollar bill.
He loses money.
Right? Yeah. Or to put it maybe another
way that's a little bit easier to understand
if if I need to generate 2000 dollars
a day,
and we're just... Let's say, a 10:10 hour
working day, that's 200 dollars an hour.
So if I spend time working on
a lawn mower rather than just taking it
to somebody who can fix it even if
they're gonna charge me a hundred bucks an
hour to fix it. If I spend 4
hours working on that, you know, there's 800
bucks
when it would cost me 200 dollars to
have him fix it. You know, some of
these perspectives, I think are helpful ways to
think about these things.
Yeah. Yep. III think it is too. Now,
I mean, anybody that knows me knows I
like to spend time working on stuff. Right?
And I I think we have to be
intentional though is
Is is that time
recreation? Or is that time actually time taking
away from doing the higher hire value jobs
in your business. Right? Like, I'm... I like
to come into the office early in the
morning. I like to be thoughtful,
get that stuff done and, you know, oftentimes
in the afternoon, you'll find me tinkering with
a project or something. Good. And to me
that's
recreation. Right? I'm I'm... It's kind of that
escape. It's kind of those things. So
you know, but if my business wasn't being
successful. Right? Somebody should be slapping me around
saying, you know, woody are he out here
screwing off or, you know, get yourself
let's go figure out how to how to
fix this thing. Right? Yeah. And you've intentionally
you've intentionally surrounded yourself with people who do
do that. That's their job. Right, is to
to look at the business and say, hey,
what's up here. Right? I mean, that's... You've
got that board in place for that for
that purpose.
Yes. We we get outside perspective into our
business yep, every year. Yep. Yep. And there'll
be links in the Show notes page today,
of course, to
Dallas previous episodes, but on that topic of
having outside eyes on your business,
specifically check out the 1 on the executive
Link program because that's what that program is
basically for is to give Ranchers the opportunity
to have those kinds of relationships where somebody
looking at your business with unbiased eyes and
trying to help you make better decisions. So
go check that out in the show its
page for today for sure.
And we'll continue on here on this discussion
and and just talk about, you know, you
mentioned overheads. And overheads are
always going to be 1 of the pre
predominant challenges
for ranch businesses
in in as I understand it is that
Is that right from your perspective?
Yeah. It is. When we we look at...
You know, we get see hundreds of of
ranch books accounts
every year and and get a look into
those and and kinda say, okay. Where where
are the problems lie? It's it's very common
for Ranches to have way too many overheads
for the amount of gross product that that
they're producing. So we call that the overhead
ratio, you know, relative to the the amount
of gross product,
For for people that aren't for familiar with
arlene lingo, gross product is similar in some
ways to gross revenue,
but it it pushes together cash and come
and inventory adjustments. Right? So
you know, in in traditional business, they're gonna
say, okay. You've got this much gross revenue,
How much of that is going to service
the the fixed cost to your business. So
it's it's a similar ratio that we're talking
about. So in a lot of the ranch
businesses we work with, overheads are just eating
up those businesses. Right? And and many of
it, we get ourselves in these situations. Right?
Because,
oftentimes we're running multi generational businesses in agriculture,
and
and as a generation as as management
tends to
mature,
trying to put this politely. Right? We we
start surrounding ourselves with things that make work
easier and more comfortable. Right? And and oftentimes
that means adding additional overheads. Right? The I
mean, the perfect example is the cab 4
wheel drive tractor
in of sitting in the old open cab
piece of junk that we used when we
were broke. Right?
And so then we take this business that's
now,
you know, a mature business that's got a
high amount of overheads. And now we hand
it to the next generation and say, okay.
Here's this mature business with enormous amounts of
overheads. And by the way, you have to
buy the land from me or your siblings
and, you know, it's your turn to run
it. Right? And so we often have these,
very bloated businesses that are that are trying
to be run by the next generation. And
so, you know, oftentimes of the way it
needs to look for that next generation is
very different from the way it was handed
to them. Right? They've gotta do some restructuring
on that to to make it successful. But...
But, yeah, if you're you're picking on me
and kinda how how we've run our business
too is is that's been a struggle from
me Right I've been preaching know, keep it
lean, low overheads and all these kind of
things. And and as I look at Rm
and and what we've been doing and the
way we've been growing, I've been adding overheads.
Right? We in growing our our people here,
our core core group, we moved to a
new larger office building, you know, to, to
house those folks. Right? We've got all these
things that come with creating this overhead business.
So it's it... You know, you're preaching this
and then you're acting in this way, but
Right. But we're very cognizant of looking at
balancing that that amount of of gross revenue
and and overhead structure and Jordan and I
Talk about this quite often and we'll sit
down a strategize and say, okay. Well, what
happens if... Like, it... It's a fear first,
you know, when this cattle market turns around.
Most people are coming too ranch for profit
with what they feel is disposable income. Right?
Well, when when this cattle market turns around
or, is everybody gonna of be real tight.
Right? And and all of a sudden, enrollments
are gonna drop, you know, down to...
Okay. What what do we look like as
a business if that happens. Right? How do
we how do we make those adjustments? And
so we're... We have those kind of conversations
and strategize. But,
and it gives me some peace of mind
when we run through. Okay. Here's Here's the
plan, but what is a worst case scenario
look like? And how do we... How do
we manage that with our current overheads? Let's
take a quick break and hear a word
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Yeah. And so how do you think about
the hiring piece of that, then when you're
looking at
this from the business owner's perspective and some
of those things thinking about hiring new people,
when to bring them on, bring them on
before you need them,
you know, kinda, how do you time the
hiring with the growth of the business?
Yeah. That's that's a great question. And I'm
gonna just put this out there. I I
don't know that I have this right.
You know, we're we're doing the best that
we know how to do and and we're
trying to be thoughtful in how we do
it. But I think there's
arguments to say maybe that what I'm doing
is not the right way to go. So,
with without being said with with the bias.
We're we're trying to be early.
We're trying to
hire
before, we're in a crisis state.
1 of the things is as we look
at what we do it it takes a
year
year and a half to 2 years to
to get somebody a part of our team
and and then develop them to the point
that they could be,
teaching ranch for profit schools, you know, and
leading those by themselves. So,
it's not like we can just switch and
and bring somebody on and then, you know,
when things go out, we can't... You know,
we the... When I'm bringing people on, I'm
I'm bringing them on with the intent of
Hey, You know, you you come and be
a part of this team, and and we're
gonna have you, you, you're you're pulling your
weight, You're adding
contributions we're not gonna lead you hydra and
dry. So
so we're we're making the decision to to
hire
before. We we probably absolutely need those folks.
And, you know, I I hope that's a
good decision as we look down the road.
I'd rather be there than be caught on
the back foot and, you know, looking at
that 2 year time window to
you know, try to get caught up. So
I think that's that's what we need. As,
you know, 1 of the things that we
talk about in class is and is a
ratio of gross product per F,
gross product per full time employee.
You know, in the in the business world,
again, they'll look at this as as gross
revenue
divided by the number of people in your
team. Right? It's kind of a same thing.
The the number in the business world that
I hear a lot is is half million
dollars,
half million dollars gross revenue per full time
employee.
Well we teach it, ranch for profit is
is 400000
dollars gross product per F. So so they're
pretty similar. You know, and I... To... Most
ranches out there are probably running somewhere around
a hundred and 25 to a hundred and
50000
gross product per full time employee,
which is part of the reason why the...
Their overheads are so far out of whack.
Right? They they have way more
people
on the payroll,
than they should relative to the amount of
of value that's act that the business is
actually producing.
Right? Now not I'm not saying when I
say that, I'm not saying that those people
aren't
aren't working hard. Right? They are working hard.
Most people are probably working too hard actually,
to be honest. Though that... There's... Either the
business is too complicated
or the business is not good at creating
value gross product. Right? These people are engaged
in doing a lot of stuff that's not
actually moving the needle.
K? Yep. So what... So when when you
look at that,
Alright. Like, let's say, let's say you... You're
looking at your books and you're like, wow,
I'm only
hundred and 50000 dollars gross product per. Right?
I need to fire some people might be
your or thinking. Well,
actually,
could could we make an argument
that you that you might actually need to
make the problem worse?
Before it gets better.
Right? And and so what I'm I'm saying
by that is sometimes
the solution to actually
creating a business that has more gross product
is
giving up the low value things that you're
doing. Right? Either stopping doing them together,
or assign them to somebody else,
I e maybe hire somebody
so that you can be liberated
or or somebody that wants to do that
stuff could be liberated to the high value
jobs.
Right? Is because what's probably not being done
are the or or the the higher value
things, You know, the planning, the strategy development.
Right? The the marketing. Right? All all those
kind of things that actually might move that
needle for you. So
so that... That's 1 of the things we
look at as as ranch for profit is,
you know, okay. How... Who...
Can we bring people on to do these
things
that then would free somebody else in the
business up to do to do some of
the higher value. And I... Many people probably
know Jordan
Jordan Steele, who's our director of operations. He's
just been an amazing part of the team
here the last couple years.
We given when we brought him on, I
had stepped back
on some of the things that I was
doing day to day. And and, you know,
it allowed me to
identify and ink some deals. For ranch for
profit that were significant deals. Right? So
these are things that I would probably have
been too busy
to otherwise pursue.
Right? So just something to think about there.
Yeah. For sure. And this is kinda that
distinction between W and W. Right? We're gonna
hire out the W give us some time
to spend some time on the watt. Right?
Exactly. Yeah. Yeah. That's let's let's tire out
some of those low value things or some
of that should. And I think too often
it's overlooked I maybe there's a real argument
too that we need to stop doing a
lot of that stuff. Right? There... I mean,
obviously, there's some things that need to be
done. But
I think for a lot of farms and
ranches, lot of businesses altogether. We spend a
lot of our time doing...
I mean, when you'd step back and look
at it, just stupid stuff. I mean, you,
I'm spending my, you know, 3 hours every
day, you know, going through emails. Right? And
deleting junk out of my inbox. Right? I
mean, you know, I... Yeah, that's an exaggeration
for me, of course. But I mean, they're...
There's...
Everybody has this in their lives. Right? There's
just Min. There's just stupid stuff that we're
spending our time doing. And by by having
that I'm devoted to that, we're not using
that time to focus on the higher value
things. Yeah. Yeah. I think this is spoken
of in the book by Tony Morgan called
killing cockroaches where he was a city manager,
and somebody called him into their office to
kill a cockroach. And he's like,
no.
This is not my job.
You know,
but I think what 1 thing we should
probably do before we go too much further
is just give a a quick and dirty
definition of overheads. And as I understand it,
that's
land and labor. Right? Are kinda your overheads,
land and the things attached to it, labor
and the things that help them accomplish their
task. Is that.
It's a great description. Yep. Oh, the overheads
are, you know, the the test of an
overhead is if I add 1 more unit
of production,
does that cost also...
Does that cost increase or or does it...
Is it not tied to those units of
production? Right? Right. If, you know, if I
add 1 more unit if that cost goes
up by 1, then it's the direct cost.
Right? If if it doesn't change, then it's
an overhead. You're your pickup depreciation. Your your
pickup doesn't care if you run 200 cows
or 400 cal. It depreciate the same. Right?
So that pickup isn't an overhead. Right? You're
your wages as as a manager as a
key employee. If, you know, we're gonna pay
you the same, whether you, you know, farm
a thousand acres or 1500 acres. Right? It
it doesn't matter. So those are all overhead
costs. So so many farms and ranches have
been taught to
allocate
all that stuff. Put everything on a on
a cost per bush, a cost per ton,
a cost per calf, and it gives you
bad information when you take your overheads and
you allocate them out per unit.
Because those overheads don't change as the unit
change. Now, Now at some point, the overheads
will either take a big step up or
a big step down. Right? So when they
change, they generally take change by big steps.
So so they need to be looked at
separately from the direct cost. Sure. And then
1 other thing, could you give me an
example of a complicated business or a business
that's too complicated. You mentioned that when we
look at these things, usually, it's a sign
that a business is too complicated
or a sign of something else. Could you
give me an example of a business that's
too complicated?
Oh, man.
I I don't know that I have a
a
definition that'll fit on the tip of a
pen.
So here's here's something that we tend to
see. The those businesses that are what we
would consider benchmark businesses. Are the highly successful
businesses. The ones that are really really good.
They tend to do
1, 2 or 3 things.
Really well
and and at scale.
Right? So so a
I guess a comp complicated business would probably
be something that's trying to do a lot
or more things than that. Mh. Right? So
I mean, it here's here's the example of,
like, a farmer ranch that
that
through well intended
decisions. Decisions... Things that seem where right have
created just a complicated mess. Right? Is Okay.
We we were maybe maybe mom and dad
had a cal calf business and and we
were selling caps. Well, you know what it
came down to the fall time, and and
I was gonna go sell those caps. Why
wasn't getting enough money for those cab and
somebody further down the line was making more.
So I'm... So I'm gonna keep my cab
and I'm gonna make yea. Out of them
now. Right? Now I'm gonna... Now I'm gonna
sell 8 9 way yea. Well, when it
came time to sell those Yea. Right? Well,
somebody down the lines getting money for taking
those ear to finish her. So I'm gonna
I'm gonna grass finish my ear and sell
grass fats. Right? Well, then I'll the the
dang packers getting all the money for the
grad. So now I'm going to
keep those and I'm gonna a direct market
my meat to somebody else. Will or to
to my consumers... Now I'm advertising quarters halves
holes. And and when I'm delivering these, my
clients say, well, I'd I'd like to just
buy a package of ground beef from you.
And and so now I start selling
individual cuts that have got freezers and inventory
management
And and now when I'm delivering my beef
to my consumers, they say, oh, do you
also have chicken. Right? So or or I'd
like to buy eggs from you. So now
I gotta go home and I start egg.
Right? And And and and so pretty soon,
you you kinda take this down the line.
Right?
How many enterprises are going on in my
ranch. Well let's say I've got Cow calf?
I've got stalker got finish finishing.
I've got my meat business, and I meat
business has my home brace. It has the
stuff I'm broker in. And now I've got
inventory management. I need websites. I need
procurement systems. I need freezers. I need trucks.
So I need somebody goes sit at the
farmers market on Saturday. Right? So now I've
got a business that's maybe still only doing
a million to 2000000 dollars of gross revenue,
and I've got
14 different enterprises layered on it. And when
I look at my books at the end
of the year, I don't even know where
the heck of money's is coming from, much
less where my costs are occurring.
I can't break this thing down into my
enterprises. Right? And every day I wake up,
and I've got a million and 1 things
to do on my to do list and
I don't know which way to start. Right?
Versus
a simple business would be,
we do
x x.
And we do x and y. Right? That's
what we do. Here here's our thing. Now,
you know, we're gonna... This year x looks
this way. Next year, x looks this way.
Right? That... That's what I mean by a
complicated versus a simple business. Yeah. For sure.
And I think that it's it's always the
temptation. Right? While I read a great book
or I watched a great Youtube video or
I listen to a podcast, and now I'm
gonna change my business I'm gonna add this
enterprise.
And like you said, 1, 2 or 3
things really well at scale, and both of
those things are important.
Not just 1 or the other. You can't
just be at scale or or doing it
well. You need to do both and that
helps
with a lot of those. Not Mean, it'll
me make a couple clarifying statements here. I'm
not saying don't consider new enterprises. I mean,
I I think every business every year should
be sitting down and say, hey, should we
be doing this?
Yeah. Should we be doing that? Should should
we be, you know, right? And and we
should be looking at all these things now
of of
the 14 good ideas that come up in
front of you,
maybe 1 of those actually gets pursued. Right?
And and of those
things. Right? We're gonna vet that an idea
ferocious, and we're gonna have... Yeah, I think
an important testing question when we look at,
new enterprises is if we're gonna do this
enterprise, it must produce a gross margin of
at least
you fill in the blank with within
2 or 3 years. Mh. Right. You know,
so, I mean, if we're talking AA2 million
dollar business,
That new enterprise better do at least a
quarter million dollars within 2 or 3 years.
Right? Or
or it's just a distraction. I mean, you
know, you don't
you know, it would be silly for ranch
for profit to pursue a new enterprise that
produced a 5000 dollar gross margin.
I mean, you know, we're
that that would just be... Right? So we
need to pursue things that that can actually
move the needle. Right? So if if you're,
you know, if you're 600 cal ranch. Right?
Selling 2 beef a year is not gonna
move the needle for you. Mh. Right. Yeah.
Talk about some of the things that you've
learned in experimenting with new projects,
new initiatives,
some of the things that you guys have
started since you took the helm. And am
I right, has it been... Will it be
4 years in September?
Is that right? Let's see. 99,
October of 99 is is when we bought
the company for 19. Yep.
October of 19, so 5 years, you know,
5 years. Wow. Yeah. So 5 years in
October. So we're... Yeah. It's it's man. Things
are things are moving quick the years tick
by.
Let's see.
I... Yeah. And, you know, that little talk
I was just given about considering new enterprises.
We've We've put a lot on the board,
you know, and we've vetted those things and
thrown them against the wall and see what
sticks, And and, some of them have have
stuck nicely and and others have have died
to death in the boardroom or or or
died to death after trying it once or
twice.
Right. If you can kill in the boardroom,
that's a that's the cheapest place to kill
it. That's the cheapest place to call it.
Yeah.
But I... We... When early on, when we
bought the company, I said, you know, 1
of my ideas is ranch management consultants, we
need to have a consulting arm. And
then I've... You know, that's the name of
our company's, ranch management consultants, and we don't
do consulting.
So
thought I thought we needed to do that.
And I got some people around me. We
built a business model around doing consulting, and
we even we even went so far as
to approach some people about being on the
team for that, and and then started to
put it out there, and it was
it was not it was it was not
really the the people that we're wanting to
do it wanted to be very selective about
who they worked with, the people that were
calling to hire us,
were not the clients that they wanted to
work with. So it wasn't, you know, the
awkward
conversation of all that. So we we just
kinda said, you know what? Let's the the
the people who we want to work with,
which are the, you know, the bon pas
size, family ranches who are you know, kind
of the heartbeat of rural America,
we couldn't come up with a pricing model
that was attractive to those
to those people. Right? Our our overheads in
our business structure did not allow us to
to build something that they felt like they
could afford. Right?
So so we kinda walked away from that
you know, and and that was 1 of
the ones that that die an early death
before we spend a lot of money on
it. Some some of the stuff that's really
worked well.
Well, there's there's a couple things that really
jump off that that are there are things
we started.
1 of those is something that just happened
last week. Is the young adult ranch for
profit school.
18 to 25 year olds,
we do about, 2 or 3 of those
a year,
we do 1 the toast in house that
we put on Jordan just taught that last
week with actually, I think we have 5
instructors that went and taught that. Jordan the
the lead from Rm c on it. And
man, that is such a cool program.
You know, it it's not a huge needle
mover from Arm c steak, but man it
it put ticks a lot of boxes next
to our mission. Right? I mean, we we
feel really good about the work we do
when we get a... We we get, you
know, 30 to 40 to 50,
18 to 25 year olds together for a
week, talking about and, you know, how are
they're gonna structure their lives to create the
life of the business they want. That's that's
a cool thing for us. So so that
was been a lot of fun.
Other ones that have that have really worked
well are the economic intensive and the succession
intensive. Right? So
when people come to ranch for profit, 1
of the things they really come to learn
is is how to get better at looking
at their numbers,
you know, running running their economics running their
finances.
You know, they come to the school, they
get taste of that, and and then they
leave and maybe they fall off their skill
set on that and and
need some help, maybe a refresher. So what
we do is we do a 2 day,
you bring your books,
we're gonna have a small instructor to to
student ratio, and you're gonna leave with your
economic plan for the coming year. And those
have been been really well received. We're doing
2 or 3 of those a year now,
and they always tend to sell out.
And yeah. Peep people feel like they get
a lot of value out of that. Yeah.
Hey, it's know, it's kinda like, just... You're
gonna come in a room and we're gonna
lock the door, and you're gonna sit down
there and do your numbers, and you're gonna
have help to get them them done and
and you don't walk out there till you
got a play. It's is kind of the
way the class is structure. Yeah. And and
some of the people sitting in my table
at the ranch for profit school when my
wife and I went through it. We're saying,
you know, some of the pressure to not
do your numbers according to the ranch for
profit model
is,
comes from the accountant comes from the banker.
Like, they don't these aren't... This isn't the
way they wanna see the numbers. So I
just... I don't go through my numbers twice
because I end up doing them the way
that they wanna see them. And so I
think that know, there's that... There's always that
pressure against doing it this way. And but
the value of approaching it the way that
Ranch you for profit teachers just be... It
just gives you such clear information about how,
you know, what is generating value and what
isn't... And I think that's that's a really
key piece of that for sure.
Yeah. Yeah. Cool. Good. Yeah. So it... Kevin
Jordan on the team too has helped with
that because he speaks accounted. Yeah. Right? He's
And and so he he kinda helps us
bridge that gap, and so he can help
folks say, hey. When when you go home
to your accountant, this is the language they're
speaking. Here here's how our stuff it can
be translated into that language. Right? So... Yeah.
Yeah. Yep. For sure.
And and 1 of the new things that
I think you've got coming up, right is
a a business,
kind of the business only
stuff from the ranch for profit school in
5 days and without the ecology. Did I
see that somewhere? Or was that some kind
of dream that I did? You did. Yep.
So So that's that's 1 of those things
that, we're we're testing this shares. So, you
know, talking about having your board, and I
took that to a group I'm working with
last year and said, hey, I'm thinking about
doing this 5 day thing and and these
are people that are very familiar with ranch
for profit, and they go, No. Don't don't
screw it up. It, you know, it's it's
been 7 days forever 7 days works really
well. You know, you make all these really
cool connections. And then they came back later
and said, yeah. I think you should try
it.
Alright? So,
so we're gonna try it. Yeah, and the
idea is that
a 7 day ranch for profit school that
the length of time can be a barrier
for some people to think they can come.
Right? There's we get a lot of people
that say, I just... I can't get away
from the ranch for... You know, if you
got a day of travel on either side,
it's a 9 day commitment. Right? And and
so what we're gonna try to do is,
not that this... Not that the ecology and
the grazing stuff's is not important. It's very
important, but you know,
people don't necessarily need to come you for
profit to learn how to take care of
their soil and how to raise better. Right?
You could learn that in a lot of
places. So
So we're gonna lighten the the elements of
ecology
and light the elements of grazing, and we're
going to leave everything
around economics, finance,
human resources, people management,
and and actually probably even dig into some
of the,
you've been a little deeper and and do
that in a Monday through Friday
format,
instead of our typical Sunday through Saturday.
And
and so the idea is we're gonna do
3 schools that way this year. We've got
our Phoenix,
Arizona school in December.
We've got,
we're gonna do 1 in the Uk in,
November, and then we'll do 1 in Sas
tuned in February. And each of those are
gonna be a 5 day format.
So we're we're gonna really 0 in on
the economics and finance and in those pieces.
And then at the end of this year,
we'll come back and evaluate, and, you know,
we're gonna have different instructors at each of
those schools and kind of you know, a
lot of folks to be able to weigh
in and say, okay, what do we think?
And and the idea is, we're either gonna
stick with the 7 day or we're gonna
really leaning into the 5 day and probably
to go all in on that, depending on
the on the outcome from this coming year.
Very cool. Very cool.
Let's circle back to this conversation
about, kinda your experience as a business owner
and talk about a couple of more things
on there, some of the some of the
phrases,
some of the buckets ideas that have been
helpful for you as you have started to
examine this business
that you are at the helm of?
Sure. Yeah. Do you you just asking me
to up for things or you guys... Yeah
Yeah you to get? Well I I mean,
I think you mentioned a couple of things
again, back to that, jared Jared Sore and
webinar.
Podcast,
you know, that... I think you you talked
on there about days of working capital,
and maybe even mentioned on their debt coverage
as well.
Debt coverage ratios, some of those things. So
those are kind of the, a couple of
things that I I still had on my
list to to talk about.
Sure. Yeah. So so, yeah. Those those have
been helpful to me and those are elements
that it are actually new to ranch for
profit in the last
year and a half.
John Has had had had some great input
to us on that. Jordan been a been
a leader in bringing this stuff in. So
so these are a couple of financial ratios
that, are worth examining
to see where you're at as a business.
And so
let's take for example, the debt coverage ratio.
So
look, we've got a...
I'm just gonna pick make up a fictitious
ranch. Somebody coming to us and they've just
sat down and and ran their economics and
And they're like, hey, my my cows are
really working. Right? My businesses are profitable. I'm
I'm exceeding the benchmarks from a gross margin
standpoint.
I wanna grow this thing. Can I buy
the neighbor's place? It's coming up for sale.
Right?
And so
just because your business is economically profitable
doesn't necessarily give an indication if you can
take on more debt.
Right? So 1 lot of the things we
need to look at is your business's ability
to service the debt it's already got.
And so we look at debt coverage ratio
to answer that. Debt debt coverage ratio essentially
says, what's my cash income for the coming
year? K? Now when we talk about a
lot of stuff we talk about is economic
profit,
economic profit, and cash income can be 2
different things. Right?
So we're gonna look at your your cat...
Your positive cash flow from this coming year
and then how much of that goes to
service debt?
Right? So what what what essentially we're saying
is,
we don't want
we we want a hundred and 50 percent
of income
relative to the amount of debt we're servicing.
Right? So I I essentially... I don't wanna
be it... I don't wanna be, a hundred
percent of my income goes to service debt.
Right? If I'm if I'm there, then
everything has to go just exactly right in
order for me to meet my obligation to
the bank. Right? So I wanna build in
some some flex in there. K? So so
that debt coverage ratio is something that that
we examine and look at that really gives
you an idea of what kind of position
are you in to go take on new
debt, how are you at servicing the debt
you already got? So
so that... That's a really really useful thing.
And the 1 that's probably been more helpful
to me as a business owner is this
idea of days of working capital.
So it it goes back to that story.
I was talking about about what what is
your daily burn rate?
So
if you sit down and figure out your
total cash costs,
to keep the doors open in your ranch
for a year, and then develop
5, that will be your burn rate. Right?
So on average, how much money goes out
the door every day. Right? Now, obviously, there's
some for for most ranches, that numbers higher
in the winter.
Lower in the summer. Right? Because we were
generally feed costs go up, you know, a
lot of that stuff. But but it's it's
useful to have that that day daily burn
rate. And then what we look at is
how much working capital do you have. Now,
working capital is a fancy term for how
much money could I get my hands on
with about 2 weeks worth of notice.
Right? So if
if I If I got myself in a
jam,
And I I needed to get my hands
on cash quickly.
How much could I come up with? Right?
And and so the things we're gonna think
about
obviously, cash in the bank, checking savings balances,
but then, like, grain and the bin,
cab that are standing in a grow yard.
Right? That could be easily sold
Right? Stuff like that. Right? So so we
take those 2 numbers,
your your working capital,
and your daily burn rate, and that will
tell us how many days of working capital
you you have on hand.
K? And and that's a really useful number
for
measuring the stress of the business owner.
As well as as your ability to get
yourself out of a jam.
Right? So maybe there's a market market swing
a drought,
maybe there's a fire on the ranch.
I... So maybe there's a death in the
family. Right?
These these kind of things that happen cause
chaos in the business. And if you've got
working capital,
now you've got time to
to weather that. Right? To to be a
little thoughtful about how you go through it.
So I'll give an example for my own
business.
You... We were talking about it. I bought
the company in 99.
Right? Well, so we had
October through February is kind of our main
operating season.
Dave was was very thoughtful in how we
transitioned the company. He sold me the company
at a time when we're getting ready to
do work. Right? So we have income. So
by the time I got to February March,
I had I had... We had somebody money
in the business. Right?
I owe Dave,
a payment for the business. And I thought
about... Well maybe I'll make David a double
payment is what I thought about that year.
You know? I I'd like to knock some
of this debt out what if I just
paid Dave twice what I owe him, and
let's make him a double payment.
I decided not to do that. And I
put that money
in the bank for the company.
And I they... I'm, I'm paying dave interest
for using that money. Right?
So
at the time I thought, well, it's kinda
silly to pay interest on money that's in
the bank, but I I think I'd like
to have a
bank. Well, what happened in March,
April, but
Covid happened?
And I kept thinking, oh, you know, a
couple months, this thing will blow over will
be fine. You know, by the time, fall
rolls around this time to do work work
will be up and going. Well, you guys
all know what happened. Right? Rural America was
delayed and getting Covid. So by the time
it rolled around when our I really delivery
season started is when Covid was really actually
hitting Rural America.
So we had a a full year of
very much in flux
you know, about our income stream? And if,
first of all, were we even gonna be
able to do work?
If so, what would that work look like?
Right? What was that gonna be? So I
was so thankful that I did not make
Dave a double payment that first year because
what it did is it gave me time
to manage through what a challenging situation. Right?
And so so that's just an example of
that is that is that days of working
capital
how how much do you have on hand
to get yourself out of a tight situation?
Yeah. No. It's... That is a helpful,
helpful 1 to think about for sure. Appreciate
that.
Anything else that you've really found indispensable as
far as just this transition into business ownership
and some of the things that have been
real helpful to you.
Oh, you know, I I guess something I'd
I'd like your listeners to think about is,
and I've been thinking a lot about this
too as well.
It... It's our job as as leaders in
our business as people that are, you know,
in in that position.
To make ourselves irrelevant as soon as possible.
So, you know, it I I've got some
awesome people that I've I have an opportunity
that are... That are part of this thing.
And it's it's really my job as a
leader of this business to empower them
to step into many of the things that
I've been doing. Right? And and so,
you know, how how do we
that right? We're thinking about that here. But
you know, I think of all the businesses
that I looked up to that are very
successful. Right? The it it does not have
a leader
that's hanging on
trying to find relevance for themselves and perpetuity.
Right? It's generally those people who are who
are helping empower and grow others,
you know, so that the they can step
into those leadership roles. So
so we're we're working on that as a
business now. I I still wanna be
you know, involved in this thing, but I
sure don't need to be the, you know,
the caption of the ship.
Forever and ever. Right? And
so that... That's something we're thinking about how
to do. Yeah. Yeah. Very good. Well, Dallas
has always appreciate your time. And,
there'll be links in the shown on pages
as They I said to previous episodes, ranch
management dot com and and everything else and
people can go there and and hack even
join, join ranch management consultants and going Transatlantic
with a school in
in the Uk. That would be an interesting
1. I'm sure.
That's right. Yeah. There there are a lot
of fun over there. I imagine some of
them were gonna be listening to this. So
I they they gave me some,
hack for some of my expressions. And the
1 they thought was the funniest.
Is when I said, hot dog.
They they like They were all picking on
me the whole time for my funny expression.
So we'd be fun to have some ranchers
from North America
go over to the school in the Uk
and we can make fun of their
bloody expressions. Yeah. Right. No. That was... I
got in trouble when I had Bob H
on,
for calling his place a ranch.
And Yeah. Yeah. No their farms. And that
has helped me where we see the the
English influence kinda wan as we cross the
hundredth Meridian,
and we get into the Spanish influence in
the west they're they're ranches. Right? And that's
kinda help me figure that out. Oh, yeah.
That's why that language is different from 1
place to the next, but... Yeah. Yeah. For
sure.
Well, Yeah. Anyways, thank you so much, Dallas.
Appreciate your time today.
You bet Clay. I appreciate all you do.
Very good stuff there. As always with Dallas.
Really appreciate his
perspective and just kinda the way that he
continues to
analyze his experiences and learn from them and
grow as a business owner himself and helping
others to do the same through the schools
and programs that they run there at ranch,
management
consultants.
Very excited to be joined next week on
the working cow podcast by Leanne Fu. We've
a, of course, talked to Eric Fu, your
husband before about soil health academy and about,
all the good work that they are doing.
Now we're gonna talk to Lia, Eric's
wife about
our approach to human health. She is a
chiropractor among other things, and we're gonna talk
to her about, a more natural approach to
human health because As I understand it, profit
isn't worth a whole lot if you're not
healthy enough to enjoy it. So we're excited
looking for to that episode coming your way
real soon on another episode of the cup
working cows podcast. See you then.
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