To be profitable means running a profitable cattle operation

Source: Farm Progress. The original article is posted here.

To be profitable means running a profitable cattle operation
According to the weather service a tornado missed my house by half a mile this week. I was eating supper and no clue it was even happening. While the tornado didn’t faze me the breeding stock sale at a weekly regular auction could’ve easily knocked me over with a feather.

The general state of the breeding stock sale that day was selling undervalued yet trading over and under to each other. Most of the females that sold were auctioned off below their Intrinsic Value (IV). Given how much higher over their IV they have been selling for this year I did not expect to see this for some time.

Staying in harmony

People that have attended the faux sell/buy schools before coming to mine are shocked to learn that they could sell a female that is selling over her IV and replace her with another female that sold over her IV and make an outstanding trade. While this school may do lip service to relationships it ignores them completely. Another thing it ignores is the reason sell/buy works is because it is in harmony with the natural laws of the universe.

In this case the Law of Polarity, or opposite, comes into play. Even though these females sold below their IV the relationships still exist and a skilled marketer, that was taught the right things, could still have executed some profitable trades.

This week I was featured on the Casual Cattle Conversations Podcast. We discussed sell/buy marketing with bred heifers being the focal point. What to Consider Before Selling or Buying Heifers with Doug Ferguson — Casual Cattle Conversations

Do not grant permission to fail

The last couple weeks I have been receiving phone calls from people who chose to attend one of the other marketing schools. They have ignored my warnings and are now paying the price. They sold an animal and can not find a replacement animal to buy. They then decide to call me and want confirmation that now is the time to either start again with a virgin buy or to just sit and hold onto their money for a while. They found out I will not grant permission to fail.

I’ll dig deeper into that in a moment. Let’s keep first things first. The first thing to running a profitable operation is the irrevocable committed decision to be profitable. There are so many sexy things people like to talk about in order to be profitable.

Making a profit

Better grazing will make your operation profitable. The latest pharmaceuticals will make our operations profitable. Some even claim genetics will make us profitable. None of that stuff will matter if you give it all away when it comes time to market the animals. This is why I say it starts with the irrevocable committed decision. This means we are going to make a profit no matter what.

There are three questions that need answered. 1) what is it that we want? In this case we already have the answer, to make a profit with cattle. 2) How bad do you want it? Most people say they want it, or they have to make a profit. We find out the real answer to that when we get to question 3) What are you willing to do about it? If you are serious about making money with cattle, the answer is you give it whatever it requires. This is where we find out most people only kind of want it and that is only if it is easy.

Try again later

I sold a load of cattle a couple weeks ago and the price I received was where I expected it to be. My Cost of Gain (COG) was a bit high, and I know why it was high with this group. The next week the cattle I planned on buying were selling higher, and they did not fit my card. For new readers with real sell/buy marketing we capture the profit on the replacement buy as this is the only thing we can control. I could not get the buy back I had already identified and still hit my profit target.

Did you catch that? I had my buy back identified before, emphasis on the word before, I sold. These people that called me were not taught that. I also knew my COG which is required in order to establish relationships between animals. Knowing this is how I knew I could not afford to buy the animals I thought I was going to buy.

Over the period of nine days myself and my team of buyers tried to get cattle bought at twelve different sales and my card got skunked at all of them. When I sit at a sale all afternoon and buy nothing it feels like a waste of time. The thing is it was still a good thing because I realized the animals that were selling were overvalued to what I sold and I did not end up owning any of them. Sometimes the way to run a profitable cattle business is to go home from the auction with an empty trailer and try again later.

Never give up on the trade

One afternoon I finally got a call from my buyer that he got me a load that will work. Here’s the thing, I never gave up on the trade. You do not start from scratch and build a seven figure business by giving up on trades. Some of these people that called me got skunked at one sale, only one, and they were ready to take a loss by holding onto their money or virgin buying.

If we hit the “reset” button and virgin buy instead of replacement buying, we lock in the loss. This strategy is a failure mindset because it left money on the table at the point of marketing, and it gives away feed and time. If a cattleman is going to do this repeatedly, like some do, they would almost be better off getting a W2 job.

Rationalizing = rationing lies

In my schools I define the word “rationalizing” which is just rationing lies to the mind. That is exactly what the instructors are doing with this strategy, they built in the escape hatch of failure into their curriculum. People like this because it fits with their existing paradigm of win some lose some which is how they viewed the cattle business before going to that school, so there was no personal growth there.

Our success in the cattle business will be determined by the trades we string together over decades of being in business. Unfortunately, some of the people that attended one of the other schools will not see the end of this decade as owners of cattle. When people continue to trade in this manner they eventually go out of business.

Cost of gain

If a person continually ends up in a position where they can’t find profitable buy backs, they should stop trading and figure out why. I wrote the piece about leading indicators a while back, there will be plenty of signs if they are paying attention. If it is the COG being high that is making buying back difficult figure out why the COG is high and what needs to be done to get it more competitive.

Unfortunately, like causes produce like results. If this person learned from someone who does not believe in sell/buy enough to do it themselves, they may not have been taught how to spot relationships. Doing things like deflecting depreciation or focusing on LRP is not sell/buy marketing.

There are other huge downfalls to the reset strategy that pertain to time and money. I will cover that next week. An irrevocable committed decision to be profitable is like burning the ships. We are going to capture the value of everything in the inventory pyramid.

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