Chapter 2: Business and Financial Planning and Management for

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Tennessee Master Meat Goat
Producer
Business and Financial Planning
and Management for Meat Goat
Operations
John Campbell
Rob Holland
Aaron Robinson
Teaching Objectives



Producers will learn basic principles of
business planning
Producers will learn the importance of
farm records and how to use them for
making management decisions
Producers will learn types of business
risk and how planning and management
can reduce such risk
Teaching Objectives


Producers will learn the value of developing
farm financial plans and utilizing enterprise
budgets in decision-making.
Producers will learn how herd performance
measures are calculated and how these
measures can be used as a basis for making
improvements in both production and
financial management
Business and Management
Planning



Successful business requires solid business
planning and management
Most successful businesses have some type of
business management plan
Goat producers should make overall business
planning a routine part of the management of
their enterprise
Mission, Goals & Tactics



The mission should clearly state why you have the
enterprise and how raising meat goats fits with your
personal and professional priorities
Goals for meat goat enterprises should be concise
statements that describe certain performance
measures which, once achieved, will help meet the
overall mission of the enterprises
Tactics are the production and management
activities that must be performed to run the
enterprise and meet the goals
Mission


Refer to Chapter 2, Page 2 in manual
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Mission, Goals & Tactics



The mission should clearly state why you have the
enterprise and how raising meat goats fits with your
personal and professional priorities
Goals for meat goat enterprises should be concise
statements that describe certain performance
measures which, once achieved, will help meet the
overall mission of the enterprises
Tactics are the production and management
activities that must be performed to run the
enterprise and meet the goals
S. M. A. R. T. Goals





Specific - - goals should be well-written,
concise, straightforward and definitive
Measurable - - goals should be measured in
quantitative terms so progress can be
monitored
Attainable - - goals must be achievable and
not in conflict with other goals
Rewarding - - the achievement of a goal
should be rewarding in some way
Timed - - goals should have a time limit for
achievement
Goals



Refer to Chapter 2, Page 3 in manual
Increase kid crop percentage by 20% in
2 years
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________________________________
Mission, Goals & Tactics



The mission should clearly state why you have the
enterprise and how raising meat goats fits with your
personal and professional priorities
Goals for meat goat enterprises should be concise
statements that describe certain performance
measures which, once achieved, will help meet the
overall mission of the enterprises
Tactics are the production and management
activities that must be performed to run the
enterprise and meet the goals
Tactics



Refer to Chapter 2, Page 3 in manual
Analyze forage and grain for nutrient
levels
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________________________________
Business Plan


Proper identification and written descriptions
of a mission, goals and tactics for a meat
goat enterprise will provide a strong
foundation for the development of a complete
business plan
A business plan provides a structure that
guides the business planning and on-going
business management process
Business Plan



A written business plan is a tool that
describes and defines the many details
of a meat goat enterprise
Development of a business plan should
be a basic management practice for
goat producers
A business plan does not have to be
long nor expensive, but it does require
an investment of time and attention
Business Plan Format






Overall description of the business
Management overview
Description of the products planned to market
Market analysis and development of
marketing strategies
Financial plan
Tax returns, legal documents, contracts and
agreements
Obtaining Financing




Insufficient planning and lack of capital are
the most frequently cited reasons that
businesses fail
Whether you are starting or expanding a goat
enterprise, sufficient capital is essential
But knowledge and planning are required to
manage capital well
Significant start-up costs can make the early
days (and years) of a new enterprise stressful
Funding the Enterprise

Comes from either one or a
combination of two primary sources


Equity
Debt
Equity



The owner’s contribution to the start
up of the enterprise
Money that stays in the business and
does not have a definite repayment
schedule
Critical component of an enterprise that
is in need of additional funds
Debt



Debt funding (or a loan) is critical for
enterprises that do not have sufficient
equity to finance the business needs
Loans are generally set-up with a fixed
payment schedule
Lenders may require that equity
represent 25 to 50 percent of the total
start-up costs for a new business
Loans


Generally obtained from commercial banks,
government agencies or some other third party that
sets a specific repayment schedule
Secured or non-secured
 Non-secured loans are based entirely on the
borrower’s financial strength and past
performance
 Secured loans require that assets be used as
collateral to secure the loan
Where do you get the money?
Sources of Start-Up Capital for
Starting a New Business Venture






Personal Resources
Commercial Lending
Friends & Relatives
Other Sources
Outside Investors
Government Agencies
60%
23%
9%
4%
3%
1%
Five C’s of Credit





Character
Capacity
Collateral
Conditions
Capital
See manual for additional details.
“Keeping records and preparing
budgets is about as exciting as
watching paint dry.”
Rosemary Harter, Illinois farm wife who helped save
the farm by improving records and developing
marketing plans.
Farm Financial Record-Keeping


Effective management of a farming
operation today requires that records be
kept so managers can make informed
decisions affecting the profitability of
their farms
Farm business decisions that are not
based on accurate farm records may
lead to less profit
Why keep records?




Proof
Decision-aids
Institutional requirements
Environmental regulations
Record Tips




Selecting a record-keeping system should
depend on the expected use of the records;
no "best" system
Record systems should emphasize decision
making, not tax preparation
Regularly and accurately post transactions
Make all financial transactions through
checking account; reconcile checkbook with
records
Whole Farm Record System
INCOME
Date
Description
Kids
10/1
Sold 20 kids @ 65
lbs/hd
$1,300
10/1
10/3
Cull Does
Corn
Purchased feed (1
ton)
Sold 2 does @ 75
lbs/hd
10/6
Purchased supplies
10/8
Purchased 1500 gals
of diesel
10/11
EXPENSE
Sold 2000 bu of corn
Feed
Supplies
Fuel
$165
$105
$165
$3,900
$4,600
Enterprise Record System
INCOME
Date
Description
Kids
10/1
Sold 20 kids @ 65
lbs/hd
$1,300
10/1
Purchased feed (1 ton)
10/3
Sold 2 does @ 75
lbs/hd
10/6
Purchased supplies
10/8
Purchased 1500 gals of
diesel
10/11
Sold 2000 bu of corn
EXPENSE
Cull Does Corn
Feed
ENTERPRISES
Supplies
Fuel
Breeding Goats
Corn
Income
Income
Expense
Expense
$1,300
$165
$165
$105
$105
$165
$3,900
$4,600
$125
$40
$150
$3,750
$4,600
Contain all the income and expenses associated
with a single enterprise.
Enterprise Record System
INCOME
Date
Description
Kids
10/1
Sold 20 kids @ 65
lbs/hd
$1,300
10/1
Purchased feed (1 ton)
10/3
Sold 2 does @ 75
lbs/hd
10/6
Purchased supplies
10/8
Purchased 1500 gals of
diesel
10/11
Sold 2000 bu of corn
EXPENSE
Cull Does Corn
Feed
ENTERPRISES
Supplies
Fuel
Breeding Goats
Corn
Income
Income
Expense
Expense
$1,300
$165
$165
$105
$105
$165
$3,900
$125
$40
$150
$3,750
$4,600
An enterprise can be any crop or type of
livestock produced on the farm.
$4,600
Enterprise Record System
INCOME
Date
Description
Kids
10/1
Sold 20 kids @ 65
lbs/hd
$1,300
10/1
Purchased feed (1 ton)
10/3
Sold 2 does @ 75
lbs/hd
10/6
Purchased supplies
10/8
Purchased 1500 gals of
diesel
10/11
Sold 2000 bu of corn
EXPENSE
Cull Does Corn
Feed
ENTERPRISES
Supplies
Fuel
Breeding Goats
Corn
Income
Income
Expense
Expense
$1,300
$165
$165
$105
$105
$165
$3,900
$4,600
$125
$40
$150
$3,750
$4,600
Should contain all cash income and direct cash
expenses for that particular enterprise.
Enterprise Record System
INCOME
Date
Description
Kids
10/1
Sold 20 kids @ 65
lbs/hd
$1,300
10/1
Purchased feed (1 ton)
10/3
Sold 2 does @ 75
lbs/hd
10/6
Purchased supplies
10/8
Purchased 1500 gals of
diesel
10/11
Sold 2000 bu of corn
EXPENSE
Cull Does Corn
Feed
ENTERPRISES
Supplies
Fuel
Breeding Goats
Corn
Income
Income
Expense
Expense
$1,300
$165
$165
$105
$105
$165
$3,900
$4,600
$125
$40
$150
$3,750
$4,600
In-direct enterprise expenses are more difficult
to assign.
Types of Expenses

Direct







Goat feed
Goat medicine
Auction fees
Trucking
Seed
Fertilizer
Lime

In-direct






Fuel
Repairs
Labor
Insurance
Utilities
Rent
Uses of Enterprise Records


Compare the profitability of different
enterprises
Developing enterprise budgets
or
Sales Records



Estimating income from sales is an important
aspect of overall management
Income estimates are almost always more
accurate when there is historical information
on which to base projections
The dollar amount of sales may not tell a
farm manager much about what was really
sold
Information in Sales Records







Date
Description of animal/animals sold
Number sold
Weight (if sold by pound)
Price
Sale expenses
Market name/buyer
Whole Herd Sales Record
Date
Description
No.
Head
Total
Weight
Price
Per Unit
Price
Unit
Gross
Sales
4-15
Kids
2
100
125.00
Cwt
125.00
5-2
Cull Doe
1
70
71.75
Cwt
50.23
6-24
Breeding Doe
1
90.00
Head
90.00
8-20
Kids
25
115.00
Cwt
1868.75
1625
Sale
Costs
7.00
175.00
Net
Sales
Buyer/Market
113.00
John Jones
43.23
TLP
90.00
Lazy G Farm
1693.75
TLP
Kid Sales Record
Price
No. Total
Per
Date Description Head Weight Unit
Price Gross
Unit Sales
4-15 Kids
2
100
125.00
Cwt
125.00
8-20 Kids
25
1625
115.00
Cwt
1868.75 175.00 1693.75 TLP
Sale
Cost
Net
Sales
Buyer/Market
113.00
John Jones
Cull Breeding Stock Sales Record
Price
No. Total
Per
Date Description Head Weight Unit
Price Gross Sale Net
Unit Sales Cost Sales Buyer/Market
5-2
Cwt
Cull Doe
1
70
71.75
50.23 7.00 43.23 TLP
Breeding Stock Sales Record
Date Description
No.
Total
Head Weight
Price
Per
Unit
Price Gross
Unit Sales
6-24 Breeding Doe
1
90.00
Head 90.00
Sale
Cost
Net
Sales
Buyer/
Market
90.00 Lazy G Farm
Assessing Risk




Agricultural enterprises are subject to
both price and production risk
Higher returns are generally consistent
with higher levels of risk
Goal is to manage risk and reduce risk
to an acceptable level
Can not completely eliminate all risk
What are some types of risk?
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What are some types of risk?
Types of Risk







Production and yield risk
Market and price risk
Business and financial risk
Technology and obsolescence
Casualty loss risk
Social and legal risk
Human risk
Developing Farm Plans



An outline of the proposed operation of
the farm business
Indicates what to produce, how much
to produce and how to produce it
Two types of farm plans


Long-run plan
Short-run plan
Long-run Plans




Estimate of the resource allocation that is
likely to yield greatest net returns over a
period of years
Based on family goals
Shows the changes in farm business
organization that must take place to attain
those goals
Revise if technology or input or output prices
change materially
Short-run (Annual) Plans


Made to fit the individual year
Implements the transition from the
present farming system to the
proposed long-run plan
Intensive Planning



Long-run and short-run farm plans must be
flexible if they are to be realistic and serve
the purpose for which they are intended
UT Extension’s MANAGE Program assists in
developing farm plans
Helps producers understand their financial
situation and make informed decisions
Answers to these questions

Where am I?

Where do I want to be?

How do I get there?
Addresses Major Financial
Objectives

Profitability – ability to generate net
income

Liquidity – provide cash when needed

Solvency – financial growth and security
Intensive Planning Tools



Long-range Planning - compares alternative
farm plans
Cash Flow Planning - projects farm cash flows
monthly or annually for up to ten years
Year-End Analysis - analyzes financial
performance of a farm business in the past
year; generates a historical data base
Enterprise Budgets



Estimate of projected income and
expenses associated with the
production of a commodity
Analyze the effects of changes within
the operation
Determine which commodity is
contributing to profitability and which
commodity is losing money
Enterprise Budgets


Usually based on some production unit such
as one breeding doe or one acre of a specific
crop
Either historical or projected


Historical enterprise budgets are created using
actual income and expense information
Projected enterprise budgets attempt to estimate
income and expenses in the future
Enterprise Budgets


If the budget is for a new enterprise,
research on expected income and
expenses should be the basis of the
budget
Estimates of changing costs or income
should be conservative
Variable Costs (Expenses)

Directly tied to the enterprise and can
be changed in the short-run





Feed
Health
Marketing
Fertilizer
Shown as per unit rate
Fixed Costs (Expenses)
 Committed to pay regardless of whether
livestock is raised during the current
planning period
 Depreciation and insurance on machinery,
equipment and buildings
 Interest on machinery, equipment,
buildings and land
 Property taxes
Recovering Costs
 Both fixed and variable costs are
considered when deciding whether to
continue production
 In the short run, the producer should
stay in production if it appears that
revenue will at least cover variable costs
 All costs must be recovered over time
Budgeting for Kid Production





Estimates goat sales and economic costs and
returns
Includes interest expenses for resources used
in the goat enterprise
Assumes existing land resources are used
Producers should use their own information
when available
Personalized adjustments should be made as
needed
Kidding Production Budget


Page 20 in manual
Table 8
Herd Assumptions For Budget






50 Does
1 Buck
150% kid crop
10 doe kids held for replacements
20% does replaced each year
Sell 9 cull does; assume 1 dies
Revenue


Sales of kids
Sales of cull does
Variable Expenses


Hay – 3.5 lbs./day for does & buck for
120 days
Corn




Kids – 1 lb./day for 120 days
Does – ½ lb./day for 90 days
Pasture – 3.3 does/acre
Salt & Minerals
Variable Expenses





Veterinary & Medicine
Marketing
Hauling
Machinery
Operating Interest
Depreciation & Repairs (Fixed)
Table 9




Buildings & equipment
Fences
Machinery
Buck (depreciation only)
Interest Expenses




Reflect the fact that capital invested is
costly, regardless of its source
Borrowed capital entails a cash interest
charge for repayment to lenders
Capital provided by the owner results in
a non-cash opportunity cost
Capital could have been invested
elsewhere and earned interest
Interest Expenses




Does & Buck
Buildings & Equipment
Fences
Machinery
Labor Expenses



Reflect the cost of hired and/or owner
labor
Owner provided labor is a non-cash
opportunity cost for earnings foregone
if time spent on another paying job or
enterprise
Hired labor is cash expense
Kidding Sensitivity Table 10Production & Price
Price
Per Cwt.
85.00
90.00
95.00
100.00
105.00
110.00
115.00
1.2
-1211.28
-1048.78
-886.28
-723.78
-561.28
-398.78
-236.28
1.3
-990.35
-811.60
-632.85
-454.10
-275.35
-96.60
82.15
Kids Weaned Per Doe
1.4
1.5
-769.41
-548.47
-574.41
-337.22
-379.41
-125.97
-184.41
85.28
10.59
296.53
205.59
507.78
400.59
719.03
1.6
-327.53
-100.03
127.47
354.97
582.47
809.97
1037.47
1.7
-106.60
137.15
380.90
624.65
868.40
1112.15
1355.90
1.8
114.34
374.34
634.34
894.34
1154.34
1414.34
1674.34
Kidding Sensitivity Table 11Production & Market Weight
Market
Weight
56.00
59.00
62.00
65.00
68.00
71.00
74.00
1.2
-1173.78
-1023.78
-873.78
-723.78
-573.78
-423.78
-273.78
1.3
-949.10
-784.10
-619.10
-454.10
-289.10
-124.10
40.90
Kids Weaned Per Doe
1.4
1.5
-724.41
-499.72
-544.41
-304.72
-364.41
-109.72
-184.41
85.28
-4.41
280.28
175.59
475.28
355.59
670.28
1.6
-275.03
-65.03
144.97
354.97
564.97
774.97
984.97
1.7
-50.35
174.65
399.65
624.65
849.65
1074.65
1299.65
1.8
174.34
414.34
654.34
894.34
1134.34
1374.34
1614.34
Personalize Budget





The basis for many decisions depends on an estimate
of annual enterprise costs and returns
This budget is intended only for a guide
Producers should use their own information
when available
Personalized adjustments to this budget
should be made as needed
The "your farm" column should be used to calculate
your own production costs and breakeven prices
Finishing Feeder Goat
Production Budget


Page 24 in manual
Table 12
Budgeting for Finishing Feeder
Goat Production






Similar format to kidding budget
50 head unit
Purchase 35 lb. feeder kid
Sell 65 lb. kid
Gain 0.33 lb./day for 90 days
Death loss 5%
Revenue
 Sale of slaughter goat
 Minus 5% death loss
 Calculated on value at time of sale
Variable Expenses





Feeder kid
Interest on feeder
Feed
Pasture – 6
kids/acre
Salt & Minerals





Veterinary &
Medicine
Marketing
Hauling
Machinery
Operating Interest
Depreciation & Repairs (Fixed)
Table 13



Buildings & equipment
Fences
Machinery
Interest & Labor


Assumptions same as for kidding
budget
Labor – ¾ hour per kid
Break-even Analysis




Finisher of feeder kids would like for
returns to cover total cost
Not always achievable
Want to recover at least the variable
cost of production at any particular time
Over the long term, the finisher must
cover all costs for the enterprise to be
profitable
Break-even Price per Cwt. Sold
COST INCLUDED
Variable (Cash Expenses)
Death Loss
Depreciation and Repairs
Interest on Buildings & Equipment
Labor
Total All Costs
AMOUNT
49.27
3.25
5.49
1.99
6.00
66.00
PRICE/CWT.
75.84
5.00
8.45
3.07
9.24
101.59
Feeder Sensitivity Table 14Purchase Price and Sale Price
Sale Price
Per Cwt.
85.00
90.00
95.00
100.00
105.00
110.00
115.00
60.00
-4.95
-1.86
1.22
4.31
7.40
10.48
13.57
65.00
-6.73
-3.64
-0.56
2.53
5.61
8.70
11.79
Purchase Price Per Cwt.
70.00
75.00
80.00
-8.51
-10.29
-12.07
-5.42
-7.21
-8.99
-2.34
-4.12
-5.90
0.75
-1.03
-2.81
3.83
2.05
0.27
6.92
5.14
3.36
10.01
8.23
6.44
85.00
-13.85
-10.77
-7.68
-4.59
-1.51
1.58
4.66
90.00
-15.63
-12.55
-9.46
-6.37
-3.29
-0.20
2.88
Feeder Sensitivity Table 15Average Daily Gain and Sale Price
Sale Price
Per Cwt.
85.00
90.00
95.00
100.00
105.00
110.00
115.00
0.18
-21.19
-18.75
-16.30
-13.86
-11.41
-8.97
-6.52
0.23
-17.56
-14.90
-12.24
-9.58
-6.92
-4.27
-1.61
Average Daily Gain
0.28
0.33
-13.92
-10.29
-11.05
-7.21
-8.18
-4.12
-5.31
-1.03
-2.44
2.05
0.44
5.14
3.31
8.23
0.38
-6.66
-3.36
-0.06
3.24
6.54
9.84
13.14
0.43
-3.02
0.49
4.00
7.52
11.03
14.54
18.06
0.48
0.61
4.34
8.06
11.79
15.52
19.25
22.97
Herd Performance Measures




Evaluate the efficiency of the doe herd
Track progress of the herd over time
Indicate potential problems
Assist in establishing goals for the
operation
Number of Exposed Females


Number of mature does and
replacements in the herd at the
beginning of the breeding season.
Each female has the potential to
conceive, raise and wean offspring.
Adjusted Exposed Females

Adjusted Lower


Females sold or transferred from the herd.
Adjusted Higher

Exposed or pregnant females purchased or
transferred into the herd.
Kidding Percentage


Measure of success of the breeding
season.
Number of Kids Born__ X 100
Adjusted Exposed Females
Kid Death Loss Percentage
Indicator of the success of the kidding
season and growing phase

Number of Kid Deaths__ X 100
Number of Kids Born
 Affected by kidding difficulty, kidding
season, environment, herd health,
condition of doe herd
 Goal: 4% or less

Weaning Percentage
(Kid Crop Percentage)



Measure of the overall reproductive
efficiency of the doe herd.
Number of Kids Weaned X 100
Adjusted Exposed Females
Determine the optimal level of weaning
percentage for the operation.
Average Weaning Weight





An indication of the productive ability of the
sire(s) and the doe herd.
Total Pounds Weaned__
Number of Kids Weaned
Indicate improvement in performance
Reflect changes in management and/or
environmental conditions
Higher weaning weights do not always result
in higher profits
Measuring Performance of a
Commercial Doe Herd






Two 50 doe herds
Weaning Weights
Weaning Percentage
No. Kids Weaned
Total Lbs. Weaned
Lbs. Weaned / Doe
Exposed
A
B
75
110
55
4125
65
130
65
4225
82.5
84.5
Pounds Weaned per
Exposed Female




Measure of overall performance and
efficiency
Combines reproductive performance
and productive ability
Total Pounds Weaned__
Adjusted Exposed Females
Weaning Percentage X Average
Weaning Weight
Effect of Weaning Percentage and Average
Weaning Weight on
Pounds Weaned per Exposed Female
- - - - - Average Weaning Weight (lbs.) - - - - 75
70
65
60
55
50
Wean. % - - - - Pounds Weaned per Exposed Female - - -
170%
127.5 119.0 110.5 102.0 93.5
85.0
150%
112.5 105.0 97.5
90.0
82.5
75.0
130%
97.5
91.0
84.5
78.0
71.5
65.0
110%
82.5
77.0
71.5
66.0
60.5
55.0
Summary


Sound business planning improves
chances for success, but there are no
guarantees
Availability of capital plays major role in
determining the long-term success or
failure of a business
Summary


Must have accurate, detailed records in
order to make sound business and
production decisions
Risk can be managed, but not
eliminated
Summary


Developing sound financial plans has
proven success in improving
management skills
Performance measure calculations
provide a base from which to measure
improvements and progress toward
goals
Final Note
No one plans to fail.
But many fail to plan.
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