Plan for the long haul
Drought, unpredictable prices, ebbs and flows in grass growth – these all can take ranchers on a roller-coaster ride of uncertainty. However, long-range strategic planning can keep the operation centered and on track while riding out the highs and lows.
A strategic plan is a big-picture look at a ranch’s present resources and operational effectiveness. Strategies are built into the plan to respond positively to uncertain conditions while holding to the family’s vision for the future.
“The strategic and scenario planning process works effectively regardless of the size of the ranching operation,” says Sean Kelly, South Dakota State University Extension range management field specialist. “It takes an in-depth look at your operation. The process may reveal unforeseen opportunities and unlock the potential of the operation while better positioning the ranch for the time when conditions and markets improve.”
Kelly suggests following these 10 steps for drafting a strategic plan for your operation.
1. Assess the current situation and inventory of ranch resources.
The inventory might include an evaluation of natural resources, such as soil health, water availability, forage health, and the availability of shelter for livestock and habitat for wildlife.
Also assess available labor and access to service providers such as bankers and accountants. Include financial information from balance sheets and cash flow statements. Include, too, physical resources such as cattle, equipment, and facilities.
A tally of human resources would include the skills, experience, and education individuals bring to the operation.
2. Conduct a SWOT analysis.
“Appraise the operation’s strengths, weaknesses, opportunities, and threats,” Kelly says. “Opportunities and threats come from outside of an operation, while strengths and weaknesses are internal.”
An opportunity could be a son or daughter wanting to come home to the operation. Threats, on the other hand, might be depressed prices or a lack of available labor.
“Strengths from within the operation could be a rotational grazing plan, low-cost production practices, or no land debt,” he explains. “Examples of weaknesses are poor marketing efforts or a lack of good watering systems for pastures.
“After pinpointing your strengths and weaknesses, you can leverage these for positive change,” Kelly continues. “For instance, if prolonged drought is a threat, then figuring out drought and grazing plans can mitigate the risks. Trigger dates or events would kick these plans into action. Having drought and grazing plans in place would then become an operation’s strengths.”
3. Establish a vision for the ranch.
Write a vision statement that expresses the goals you’re working toward.
“Write down the business’ values and reason for being,” he says. “Describe the future as you envision it. What would the business look like if it attained its goals? Also describe how the business benefits its stakeholders. Describe the situation you want to achieve in five to 10 years.”
4. Do a GAP analysis.
By comparing information in the first two steps with the goals in your vision statement, you can see where the gaps are between the present operation and your vision for it. “For instance, not having a drought plan in place is a huge gap,” Kelly says.
5. Describe strategies to close the gaps.
Once you’ve identified the gaps, you can begin brainstorming strategies for closing them. Finding new resources such as skills, capital, or products could help.Reallocating resources is another strategy you can use. This tactic could serve to refocus resources in a more targeted fashion.
6. Describe multiple scenarios.
Scenario planning is a process of looking forward, trying to anticipate the future. Identify possible scenarios affecting the operation that may need to be addressed. For instance, these might include the possibility of a dwindling labor supply or possible increases in pasture lease rates.
7. Select and evaluate the most probable scenarios.
From the list of possible scenarios, select two to four that seem the most likely to occur and that would also have the most significant impact on your operation.
8. Determine strategies with the highest likelihood of success.
This step helps you invest your energies in ways that will most benefit your operation. Evaluate the strategies from Step 5 for the effect they may have on the most probable scenarios. Will it be positive or negative? Those strategies with the most positive impact will become the foundation of your strategic plan.
9. Implement the strategic plan.
Decide and implement the detailed time lines, budgets, and assignments of responsibilities that will comprise the day-to-day activities that carry your operation toward your vision.
10. Monitor performance.
Periodically evaluate how the strategic plan is affecting your vision for the operation and its resources. Using a balanced scorecard can help. This monitoring tool can be separated into categories including learning and growth, natural resources, ag commodities and production, customers, finances, and lifestyle.
“Completing a balanced scorecard once a year can help you see how your management decisions are affecting various aspects of the operation,” Kelly says. “It can help you ferret out problems and show you what you need to work on in the future. It also helps you communicate with other stakeholders in an operation.
“Many challenges face the ranching industry at this time, and many more are on the horizon,” he adds. “By implementing a strategic plan, a ranch manager will be better positioned to manage risk and meet those challenges.”