1. Watch Your Cash
Gary Matteson, Farm Credit Council

3. Looking to the Future
• What are your skills?
• What is your tolerance for risk?
• What is your capacity to deal with
ambiguity?
• What is your capacity to lead others?
• What is your capacity for self-discipline?

4. What is your capacity to gather information?

5. define success
acres
tractors
cows
gross sales
yield/acre
net profit

6. define success
enough net profit to meet your goals
for your family and your business

7. know your business
•
•
•
•
Plan to succeed, plan to be happy
Tell your story in a business plan
A budget is a plan in numbers
Plan for contingencies

14. The 5-Line Income Statement
Historical
Dollars
% of Sales
Sales (total income)
$367,200
100%
- Cost of Goods Sold:
$312,600
85%
$54,600
15%
$7,800
2%
$46,800
13%
(variable costs)
= Gross Margin:
- Overhead(fixed costs)
= Profit (Net Margin)

15. Showing Annual Business Results
This 5-Line
Income Statement
Historical
Dollars
% of Sales
Sales (total income)
$367,200
100%
- Cost of Goods Sold:
$312,600
85%
$54,600
15%
$7,800
2%
$46,800
13%
(variable costs)
Becomes the basis
of this Cash Flow
Analysis
Spreadsheet
= Gross Margin:
- Overhead(fixed costs)
= Profit (Net Margin)

16. The Concept of Cash Flow Budgeting

18. Grass Fed Cash Flow Analysis
Summary of Annual Results from
Spreadsheet (the 5-Line Income Statement)
GROSS RETURNS PER 200 HEAD
also called Total Sales, Total Income:
As %
Annual Total
Sales
$ 367,200.00 100%
A. TOTAL VARIABLE COSTS
also called Cost of Goods Sold or COGS
$ 312,600.00
85%
15%
15%
GROSS MARGIN (Total Sales-Variable Costs=Gross Margin)
B.
TOTAL FIXED COSTS or Overhead:
NET MARGIN (Sales-Variable Costs-Fixed Costs=Net Return) Also called net profit
$
7,800.00
$46,800.00
2%
13%

19. Grass Fed Cash Flow Analysis
Monthly Results Spreadsheet
GROSS RETURNS PER 200 HEAD
also called Total Sales, Total Income:
$
-
$
Jan
A. TOTAL VARIABLE COSTS
also called Cost of Goods Sold or COGS
$ 116,033.33
-
$
Feb
$
9,033.33
-
$
Mar
$
9,033.33
-
$
April
$
7,633.33
36,720.00
$ 73,440.00
$ 73,440.00
June
July
May
$
7,633.33
$ 114,633.33
$
7,633.33
$
-
$
Aug
$
7,633.33
-
$
Sept
$
7,633.33
-
$
Oct
$
7,633.33
73,440.00
$ 110,160.00
Nov
$
9,033.33
As %
Total
Sales
$ 367,200.00 100%
Dec
$
9,033.33
Annual
$ 312,600.00
85%
15%
15%
GROSS MARGIN (Total Sales-Variable Costs=Gross Margin) This is based on results from previous year of operation, or it is estimated from a benchmark
B.
TOTAL FIXED COSTS or Overhead:
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
650.00
$
NET MARGIN (Sales-Variable Costs-Fixed Costs=Net Return) Also called net profit or net income in dollars, or net profit margin when described as a percentage
E. MONTHLY CASH FLOW (D-C)
$ (116,683.33)
$ (9,683.33)
$ (9,683.33)
$ (8,283.33)
G. Beginning Cash (Checking Account)
$175,000.00
$58,316.67
$48,633.33
$38,950.00
H. Ending Cash (Checking Account)
$58,316.67
$48,633.33
$38,950.00
$
$30,666.67
Cash flows are
highlighted in
yellow
28,436.67
7,800.00
$46,800.00
$ (41,843.33)
$ 65,156.67
$ (8,283.33)
$
(8,283.33)
$30,666.67
$59,103.33
$17,260.00
$82,416.67
$74,133.33
$59,103.33
$17,260.00
$82,416.67
$74,133.33
$65,850.00
$
(8,283.33)
$
63,756.67
$ 100,476.67
$65,850.00
$57,566.67
$121,323.33
$57,566.67
$121,323.33
$221,800.00
$
46,800.00
2%
13%

20. Grass Fed Monthly Cash Flow Analysis
GROSS RETURNS PER 200 HEAD
also called Total Sales, Total Income:
$
-
$
-
-
$
$
-
$ 36,720.00
$ 73,440.00 $ 73,440.00
$
-
$
-
$
-
As %
Total
Sales
$ 73,440.00 $ 110,160.00 $ 367,200.00 100%
VARIABLE COSTS PER 200 HEAD:
Purchase Price
Transport
Summer Pasture
Winter Hay - Forage
Other Feed
Protein & Mineral
Hired Labor
Veterinary & Supplies
Utilities, Fuel, Oil
Facility & Equip Repair
Breeding Charge
Marketing
Misc
Interest
A. TOTAL VARIABLE COSTS
Jan
$ 105,000.00
$ 2,000.00
$
$
$
$
$
$
$
6,200.00
500.00
333.33
333.33
250.00
583.33
166.67
Feb
April
333.33 $
166.67 $
333.33 $
166.67 $
June
$105,000.00
$ 2,000.00
4,800.00 $ 4,800.00
333.33
166.67
$
$
166.67 $
166.67 $
$
166.67 $
166.67 $
$ 116,033.33 $ 9,033.33 $ 9,033.33 $ 7,633.33 $
Sept
Oct
Dec
Nov
July
Aug
$ 4,800.00
$ 4,800.00
$
4,800.00
$
4,800.00
$
$
$
$
$
$
$
$
$
$
$
$
500.00
333.33
333.33
250.00
583.33
166.67
$
$
$
$
$
$
500.00
333.33
333.33
250.00
583.33
166.67
$
$
$
$
$
$
500.00
333.33
333.33
250.00
583.33
166.67
$
$
$
$
$
$
$
6,200.00
500.00
333.33
333.33
250.00
583.33
166.67
$
$
$
$
$
$
$
6,200.00
500.00
333.33
333.33
250.00
583.33
166.67
333.33 $
166.67 $
333.33
166.67
$
$
333.33
166.67
$
$
333.33
166.67
$
$
333.33
166.67
$
$
333.33
166.67
166.67
166.67 $
166.67 $
166.67 $
7,633.33 $114,633.33 $ 7,633.33 $ 7,633.33
$
$
166.67
7,633.33
$
$
166.67
7,633.33
$
$
166.67
9,033.33
$
$
May
$ 4,800.00 $
$ 6,200.00 $ 6,200.00
$
500.00 $
500.00 $
500.00 $
$
333.33 $
333.33 $
333.33 $
$
333.33 $
333.33 $
333.33 $
$
250.00 $
250.00 $
250.00 $
583.33 $
583.33 $
$
583.33 $
$
166.67 $
166.67 $
166.67 $
333.33 $
166.67 $
$
$
Mar
500.00
333.33
333.33
250.00
583.33
166.67
$
$
$
$
$
$
500.00
333.33
333.33
250.00
583.33
166.67
333.33
166.67
$
$
333.33 $
166.67 $
500.00
333.33
333.33
250.00
583.33
166.67
Annual
$ 210,000.00
$ 4,000.00
$ 33,600.00
$ 31,000.00
$ 6,000.00
$ 4,000.00
$ 4,000.00
$ 3,000.00
$ 7,000.00
$ 2,000.00
$
$ 4,000.00
$ 2,000.00
166.67 $ 2,000.00
9,033.33 $ 312,600.00
GROSS MARGIN (Total Sales-Variable Costs=Gross Margin) This is based on results from previous year of operation, or it is estimated from a benchmark
FIXED COSTS PER 200 HEAD:
Depreciation
Interest
Insurance
Death Loss
B. TOTAL FIXED COSTS or Overhead:
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
15%
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
166.67
150.00
333.33
650.00
$
$
$
$
NET MARGIN (Sales-Variable Costs-Fixed Costs=Net Return) Also called net profit or net income in dollars, or net profit margin when described as a percentage
C. TOTAL COSTS PER 200 HEAD: (A+B)
$ 116,683.33
$ 9,683.33
$ 9,683.33
Jan
Feb
$ 8,283.33 $
Mar
8,283.33 $115,283.33
$ 8,283.33
$ 8,283.33
July
2,000.00
1,800.00
4,000.00
7,800.00
$46,800.00
$
Aug
8,283.33
$
8,283.33
$
9,683.33
9,683.33 $ 320,400.00
Steers
Heifers
Cull Cows
Cull Heifers
D. GROSS RETURNS/200 HEAD (Sales):
$
$ 73,440.00 $ 110,160.00 $
$
$
$
$ 73,440.00 $ 110,160.00 $
E. MONTHLY CASH FLOW (D-C)
$ (116,683.33) $ (9,683.33) $ (9,683.33) $ (8,283.33) $ 28,436.67 $ (41,843.33) $ 65,156.67 $ (8,283.33) $ (8,283.33) $ (8,283.33) $ 63,756.67 $ 100,476.67 $
46,800.00
G. Beginning Cash (Checking Account)
$175,000.00
$58,316.67
$48,633.33
$38,950.00
$30,666.67
$59,103.33
$17,260.00
$82,416.67
$74,133.33
$65,850.00
$57,566.67
$121,323.33
H. Ending Cash (Checking Account)
$58,316.67
$48,633.33
$38,950.00
$30,666.67
$59,103.33
$17,260.00
$82,416.67
$74,133.33
$65,850.00
$57,566.67
$121,323.33
$221,800.00
May
April
June
$ 36,720.00
-
$
-
$
-
$
-
$ 73,440.00 $ 73,440.00
Oct
$ 73,440.00 $ 73,440.00
$ 36,720.00
Sept
Nov
$
Total
Income
367,200.00
367,200.00
GROSS RETURNS PER 200 HEAD:
$
85%
-
$
-
$
-
Dec
2%
13%

22. how quickly can you make money?
•
•
•
•
Goal of producing cash in 6 months
Budget to accomplish goal
Pay your bills
Family living expenses

23. Managing inventory/expense…the time factor…
24-36 months
1-2 months

24. plan your business
•
•
•
•
Record keeping is required for taxes
Ultimate goal is to manage from records
Need up-to-date and accurate records
Create budget with expectations and
measurable results

25. starting in the beef business
Like any small business:
income
expenses
cash flow

26. things to do before starting
•
•
•
•
•
Save money
Protect credit rating
Gain experience
Network
Plan

29. • Cycle
for
cash
flow…

30. North Dakota:
Returns Per Cow
• 2012 Returns: Cow/Calf Operation*
– Average : $171.70 Net return per cow
– Low 20%: -$34.65
– High 20%: $347.25
– *Based on 527 wwt @ $157.34/cwt.

31. North Dakota:
Backgrounding Returns
• 2012 Backgrounding Operation Net
Returns*
– Average: $17.31/cwt
– Low 20%: -$73.12/cwt
– High 20%: $66.64/cwt
– *Based on avg gain of 154 lbs and sale price
of $143.46/cwt.

32. North Dakota:
Corn Net Returns
• 2012 Net Corn Returns Per Acre:
– Region 2
• Average: $252.40
• Low 20%: $52.74
• High 20%: $447.97
– Region 3
• Average: $383.96
• Low 20%: $93.07
• High 20%: $554.06

33. Grass Fed Beef Net Returns
• Return Per Head
– Average Range: $150 - $350
– Low 20%: $10 - $80
– High 20%: $380 - $450
• Return Per Acre
– Average Range: $180 - $300
– Low 20%: $15 - $65
– High 20%: $325 - $400

34. Business Cycle ~ Cash Flow
Cycle
• Plan, prepare – avoid surprises, achieve
success

35. Helpful Resource Links
•
•
•
•
•
•
•
•
www.finbin.umn.edu
www.ndfarmmanagement.com
www.iowabeefcenter.org
www.grazinghandbook.com
www.bcscd.com
www.Mccc.msu.edu
www.Mandan.ars.usda.gov
www.greencoverseed.com

37. manage your business
Three basic business skills:
1. Financial
2. Production
3. Marketing
If you are lucky you have two of these skills.
Partner with or hire the skill you don’t have.

38. .www.annualcreditreport.com