Key Performance Indicator Targets for Beef Cow-calf...
Transcript of Key Performance Indicator Targets for Beef Cow-calf...
![Page 1: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/1.jpg)
Key Performance Indicator Targets for Beef Cow-calf Operations
Stan BeversProfessor & Extension Economist
Texas A&M AgriLife Extension ServiceVernon, Texas
![Page 2: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/2.jpg)
Key Performance Indicators (KPI)
• Performance Measures of Key Activities happening as a result of your management.
• Is management fulfilling the goals of the ownership.
• Tracked over time.
![Page 3: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/3.jpg)
Key Performance Indicators
• Production KPI follows Beef Cow-calf SPA
• Financial KPI’s follow Farm Financial Standards Council approach for accrual financial statements.
• It is important to calculate them correctly.
![Page 4: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/4.jpg)
Key Performance Indicators
• Need to balance the use of KPIs.
• To focus on one, at the expense of another, will not improve the overall performance of the ranch.
![Page 5: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/5.jpg)
KPI Targets• Some are specifically for Cow-calf
enterprises, while others cover the entire ranching operation
• Many ranches are involved in multiple enterprises.– KPI for all activities
• Targets have been identified through analysis of individual ranches (Cow-calf SPA, Managerial Ranch Accounting, etc.), experience, and research.
![Page 6: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/6.jpg)
13 KPI Targets
• 1 Production KPI
• 8 Financial KPIs
• 4 Integrated KPIs
• There are an unlimited number of “other” KPIs. Each ranch should determine those activities that are critical to your ranch’s success and determine the best method to calculate a performance.
• Others are not any less important
![Page 7: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/7.jpg)
Production KPI
Pounds Weaned per Exposed Female
• 460 pounds per Exposed Female
– Should be a KPI for any ranch that owns breeding cows with the intent of weaning calves.
– Product of weaning percentage and weaning weights
– Total pounds weaned divided by all females that were exposed and intended to be bred.
![Page 8: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/8.jpg)
Production KPI
Pounds Weaned per Exposed Female460 pounds per Exposed Female
300
350
400
450
500
550
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
![Page 9: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/9.jpg)
Percent Normal Rainfall
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2
![Page 10: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/10.jpg)
Percent Normal Rainfall Effect on Pounds Weaned per Cow Exposed
![Page 11: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/11.jpg)
Integrated KPI
Cost per Cwt. of Weaned Calf
• Less than $170 per Cwt.– IMO: The most important number for ranch
management
– Incorporates:• Productivity
• Total expenses it took to get that production
– Every ranch has different resources; this KPI shows how efficiently those resources are being used to create productivity.
– Total expenses (less “other revenue”) divided by total pounds weaned.
![Page 12: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/12.jpg)
$-
$50
$100
$150
$200
$250
$300
$350
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Integrated KPI
Cost per Cwt. of Weaned CalfLess than $170 per Cwt.
![Page 13: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/13.jpg)
Financial KPI
Rate of Return on Assets (Cost Basis)
• Greater than 1.5 percent
– Bottom line for ranch owners
– This KPI should be measured over time.
– Net income (plus interest paid) divided by total assets
– This is the driving force behind the long-term decline in breeding cow numbers.
![Page 14: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/14.jpg)
-5
0
5
10
15
20
25
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Financial KPI
Rate of Return on Assets (Cost Basis)Greater than 1.5 percent
![Page 15: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/15.jpg)
Integrated KPI
Revenue per Breeding Female
• Greater than $950 per Breeding Female
– Not just the value of sold weaned calves
– Total revenue from weaned calf sales, retained calf values, gains/losses on the sales of breeding stock, and the accrual adjustments on inventories.
– To compare, it should not include sales from other ranch enterprises
• Hay sales
– This target can and will move.
![Page 16: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/16.jpg)
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Integrated KPI
Revenue per Breeding FemaleGreater than $950 per Breeding Female
![Page 17: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/17.jpg)
Financial KPI
Operating Expense as a Percent of Total Revenue• Less than 75 percent of Total Revenue
– Controlling expenses can be one of the most important exercises for ranch management.
– Operating expenses = All expenses except interest and depreciation.
– Given 75 % target, the ranch has 25% of the ranch revenue to
1. Pay interest
2. Escrow depreciation expenses
3. Retain as net income
![Page 18: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/18.jpg)
0%
20%
40%
60%
80%
100%
120%
140%
160%
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Financial KPI
Operating Expense as a Percent of Total Revenue Less than 75 percent of Total Revenue
![Page 19: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/19.jpg)
Financial KPI
Net Income as a Percent of Total Revenue• Greater than 5 percent of Total Revenue
– That portion of total revenue that is being retained as net income.
– Four things that a ranch can do with revenue:
1. Pay operating expenses
2. Pay interest expense
3. Escrow depreciation expenses
4. Retain as net income
– Corresponds with previous KPI
![Page 20: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/20.jpg)
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Financial KPI
Net Income as a Percent of Total Revenue Greater than 5 percent of Total Revenue
![Page 21: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/21.jpg)
Financial KPI
Labor and Management Expense as a Percent of Total Revenue• Less than 15 percent of Total Revenue
– One of the most variable expenses
– Hired Management versus Owned Labor
– Include salaries, wages, taxes, benefits, and chuck.
– For every dollar of ranch revenue, the ranch is spending $0.15 of that dollar to pay L&M.
– Total L&M divided by Total Revenue generated on the ranch
![Page 22: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/22.jpg)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Financial KPI
Labor and Management Expense as a Percent of Total Revenue
Less than 15 percent of Total Revenue
![Page 23: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/23.jpg)
Financial KPI
Nutrition Base Expense as a Percentof Total Expenses• Between 30 and 45 percent of Total Expense
– Reproduction is the most important factor in ranch productivity, thus, herd nutrition is imperative.
– No two ranches have the same resources.
– Identify three types
• Expenditures for purchased nutrition
• Expenses associated with raising nutrition
• Costs associated with grazing
– These three divided by Total Expense
![Page 24: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/24.jpg)
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2
Financial KPI
Nutrition Base Expense as a Percent of Total Expense Between 30 and 45 percent of Total Expense
![Page 25: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/25.jpg)
Integrated KPI
Total Investment (Market Basis) per Breeding Female
• Between $7,500 and $12,500– Focus on the Ranch Owner
– Land is the greatest influencer.
– Total Assets divided by total number of breeding females as of January 1.
– Assumes some land is already controlled
– Demonstrates the real difficulty for beginning ranchers
– Potential heirs looking at this figure and wondering..
![Page 26: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/26.jpg)
$0
$2,500
$5,000
$7,500
$10,000
$12,500
$15,000
$17,500
$20,000
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2
Integrated KPI
Total Investment (Market Basis) per Breeding FemaleBetween $7,500 and $12,500
![Page 27: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/27.jpg)
Financial KPI
Asset Turnover Ratio (Cost Basis)• Greater than 15 percent
– Given the highly capitalized nature of ranching, it is vital for the manager to generate the greatest possible net income.
– This KPI details how many revenue dollars each dollar of asset is creating.
– Target: Every dollar of asset is generating $0.15 of revenue.
– Seems low, but that demonstrates the nature of ranching
![Page 28: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/28.jpg)
0
5
10
15
20
25
30
35
40
45
2009 2010 2011 2012 2013 2014 2015
Ranch 1 Ranch 2 Target
Financial KPI
Asset Turnover Ratio (Cost Basis)Greater than 15 percent
![Page 29: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/29.jpg)
KPI targets I didn’t show you• Current Ratio
– Greater than 2.0
• Debt per Breeding Female
– Less than$500 per female
• Equity to Asset Ratio
– Greater than 50%
![Page 30: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/30.jpg)
KPI targets Not Common to All Ranches
• Hay Production Cost per Ton
– Less Than $150/ton
• Cost of Gain on Small Annual Pasture
• Others?
![Page 31: Key Performance Indicator Targets for Beef Cow-calf Operationsanimal.ifas.ufl.edu/beef_extension/bcsc/2016/ppts/bevers.pdf · Key Performance Indicator Targets for Beef Cow-calf Operations](https://reader030.fdocuments.in/reader030/viewer/2022040421/5e0ac26fa323f9571623b263/html5/thumbnails/31.jpg)
Key Performance Indicator Targets for Beef Cow-calf Operations
Stan BeversProfessor & Extension Economist
Texas A&M AgriLife Extension ServiceP.O. Box 2159Vernon, Texas
940 552-9941 ext. [email protected]
http://agrisk.tamu.eduTwitter: RollingPlainsAg