Holistic Management Financial Planning

Holistic
Management
Course
August 24-30
The Farm,
Summertown, TN
Facilitated by:
Kirk L. Gadzia
~ P.O. Box 1100 ~ Bernalillo, NM 87004
Phone 505-867-4685 ~ Cell 505-263-8677
Email: kgadzia@msn.com
Web:
www.resourcemanagementservices.com

Holistic
Management
Financial Planning
Kirk L. Gadzia
• ~ P.O. Box 1100 ~ Bernalillo, NM 87004
• Phone 505-867-4685 ~ Cell 505-263-8677
• Email: kgadzia@msn.com
• Web: www.resourcemanagementservices.com

Profit Paradigm

PRICE DIFFERENCE

IS
COST OF PRODUCTION
PROFIT

NO CONTROL OVER PRICE OR COSTS
PROFIT IS OUT OF OUR CONTROL

Profit Paradigm
PROFIT OUT OF OUR CONTROL BECAUSE:
1. Prices are too low for the products produced.

2. Our costs to produce the products are too high.

T r ue o r F a ls e ? American farmers and ranchers enjoy
some of the best opportunities in the world for profit.

•They receive some of the highest prices in the world
for the raw agricultural products they sell.

•They pay some of the lowest prices in the world for
most of the inputs needed to farm or ranch.

NEW Profit Paradigm
PRICE
Demand Creativity DIFFERENCE
Marketing
COST OF PRODUCTION IS
Determination Creativity
PROFIT
Management Attitude
Planning Self - Discipline

Responsibility for PROFIT is entirely ours!

Which Farm is More Profitable?

1. 45 Bushes per Acre
2. $75,000 Taxable Profit
3. .5% Organic Matter Loss
4. 1 Ton / Acre Soil Loss

1. 40 Bushes per Acre
2. $55,000 Taxable Profit
3. .5% Organic Matter Gain
4. Zero Soil Loss

Which Farm is More Profitable?
Farm A: 1000 Acres
• 1 Ton Soil Loss @ 0.5% Organic Matter (OM)
= 100,000 lbs. OM on 1,000 Acres
• 100,000 lbs. OM = 60,000 lbs Organic Carbon
• At Normal Carbon:Nitrogen Ratio = Nitrogen Equivalent of 50,000 lbs
• Estimated Cost of Nitrogen @ $.50 / l b.
• $.50 x 50,000 lbs. = $25,000 or $25 / Acre to Replace Lost Nitrogen

Farm B: 1000 Acres
• .5% Organic Matter Gain = $25,000 Gain, by Above Calculations

• Farm A: $75,000 Profit - $25,000 N Loss = $50,000 Net
• Farm B: $55,000 Profit + $25,000 N Gain = $80,000 Net
Aeration? Water Holding Capacity?
Drought Resilience? Trace Minerals?
Soil Life?

Sources of Wealth
Where did the Wealth Originate?

But:
=
Does the Source Matter?

HUMAN CREATIVITY
PLUS ORGANIC OR MINERAL $
MINERAL RESOURCES =

CAN BE USED IN A CYCLICAL OR A CONSUMPTIVE

MANNER OR TO BUILD INFRASTRUCTURE

ENERGY DERIVED IS POTENTIALLY DAMAGING

EXAMPLES: OIL, GAS, COAL, GOLD, DIAMONDS
SOIL, FORESTS, WILDLIFE.

HUMAN CREATIVITY
PLUS TRANSACTIONS
= PAPER $

CAN BE CREATED OR LOST OVERNIGHT.

STABILITY, SUBSTANCE, OR VALUE

DEPENDS ON CONFIDENCE OF SOCIETY

IN GOVERNMENT AND BANKING .

EXAMPLES: STOCKS, LOANS, SALARIES,
FUTURES, LAND SPECULATION, ETC.

HUMAN CREATIVITY PLUS
CONSTANT SOURCES OF ENERGY =

SOLAR $

ENERGY NOT KNOWN TO
ENDANGER ENVIRONMENT

ONLY FORM OF WEALTH WHICH
CAN SUSTAIN PEOPLE

EXAMPLES: SUNLIGHT, WIND, WAVE ACTION,
GEOTHERMAL , GRAVITY

Planning for Non-Profitability

The 4 Human Tendencies
1. Allow Production Costs to Rise to Anticipated Income
2. Borrow Against Anticipated Income
3. Spend Minimal Time Planning on Paper
4. Monitoring Efforts Too Late or Non Existent

Income

Expenses

Interest

Normal Income Rises Income Drops

Planning for A Profit
Planned Income $400,000

Planned Profit 25 - 50% of Gross Income

Expense Allocation Cap 50-75% of Income

With High Debt Service

Planned Gross Income $400,000

Planned Profit 25 - 50% of Gross Income
After Debt Service Paid

Expense Allocation Cap 50-75% of Income
After Debt Service Paid

Debt Service $150,000

The Monthly WOTB! =
Working On The Business – Monthly Meetings
Step 1. Always Begin by Reviewing the Holistic Goal
Step 2. Keep Meeting Focused on Strategic Items
•Test Your Proposed Actions Against Your Goal
•Make a Plan for Specific Actions That Pass The Tests
•Make a Timeline for Completion
•Decide Who Will be Responsible for Seeing That Action
is Completed

Step 3. Review Commitments and Actions
and Set Date for Next Meeting.

The Big Yearly WOTB! =
Working On The Business
Step 1. Having a Holistic Goal in Place
Step 2. Using the Holistic Mgt. Decision Making Process –
Testing Your Decisions Against Your Goal
Step 3. Planning the Planning – Laying the Foundation
• Creating Ownership – Who is Involved?
• Overview and Scheduling
1. Preliminary Session – ID
2. Gathering Information
3. 1-2 Day Planning Retreat
1. Final Session to Adjust and Schedule

Q: If I Pull Hard Enough
On This Chain – Where
Will It Break?

A: The Chain Will Always
Break At the Weakest
Link!

Q: If I Repair That Link In The
Chain and Pull Again –
Where Will It Break Now?

A: The Chain Will Always
Break At the Weakest Link!

The Weak Link in Creating New Wealth

Marketing
Resource Product
(Money)
Conversion Conversion
Conversion

Sunlight Products
and/or raw Marketing
and/or of
resources services
including Products
money and and/or
creativity services

The Weak Link in Agricultural Operations

Marketing
Resource Product
(Money)
Conversion Conversion
Conversion

Conversion Conversion Marketing of
of Sunlight of Plants to Agricultural
Through Meat, Products
Plants Wildlife, Changing
(Pasture, Hay, Grain, the
Crops, etc.) etc.

Possible Items to Check
Resource In A Livestock Operation:
Conversion •Not Enough Grass
•Few Paddocks
•Poor Control of Livestock
•Too Many Herds
•Poor Drainage or Water Cycle
•Plant Diversity Low
Conversion •Lack of Litter Cover
of Sunlight •High Supplement Cost
Through •Low Soil Fertility
Plants •High Levels of Brush or Weed
(Pasture, Invasion
Crops, etc.) •Riparian Areas Degraded

Product In A L ive s to c k O p e r a tio n :
Conversion •Unused forage
•Unused forage for other species
•Poor Conception
•Poor Gains
•Poor Genetics
•High Mortality
Conversion •High Predation
of Plants to •Low Enterprise Diversity
Meat,
Wildlife,
Hay, Grain,
etc.

Marketing
(Money) In A Livestock Operation:
Conversion •Low asset turnover – few
marketing opportunities
•Low relative prices
•Insensitivity to demand
•Poor knowledge of market
•Poor quality
Marketing •Low sales effort
of •Low Enterprise Diversity
Products
and/or
services


Marketing
Resource Product
(Money)
Conversion Conversion Conversion

=
Q: Where
Should I A: The Chain Will Always
Reinvest Break At the Weakest Link!
The
Money?

Planning For Profitability

Plan Tax
Consequences Profit

ON D J F M A M J J A S O N D J F M

Plan Monthly Replan
A Monitor & For Next
Profit Control Year

Three Phases of Annual
Wealth Generation Plan
Mechanical
Paper & Computer
Psychological
“Attitude”
Holistic Management
Decision Making Process

Expense Categories
A. Items That Generate New Wealth

B. Inescapable Expenses

C. Maintenance Expenses

D. Wrong Expenses

Principle of Allocating Expenses
A. Allocate $ First –100% of Needed Amount

B. Inescapable Expenses – Allocate 2nd
Are These Really Inescapable?
Minimum Amount Necessary.
C. Maintenance Expenses – Allocate
Last, Brainstorm Ways to Reduce.
Minimum Amount Necessary.
D. Waste of Time and $ - Eliminate!
Treating Symptoms and Non-Weak Link Items

6 Keys To Profitable Ranching
1. Wholistic or Integrative Approach
2. Continuous Improvement of Key Resources
A. Land B. Livestock C. People

3. Use of Planning Tools
A. Financial B. Land and Livestock C. People- Time Mgt.

4. War on Costs / War on Work
5. Emphasis on Marketing
6. Diversity
A. Income B. Biological C. People- Ideas

Holistic Management Financial Planning

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