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 60%
 Commercial Lending 23%
 Friends & Relatives 9%
 Other Sources 4%
 Outside Investors 3%
 Government Agencies 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 EXPENSE
Date Description Kids Cull Does Corn Feed Supplies Fuel
10/1 Sold 20 kids @ 65
lbs/hd $1,300
10/1 Purchased feed (1
ton) $165
10/3 Sold 2 does @ 75
lbs/hd $105
10/6 Purchased supplies $165
10/8 Purchased 1500 gals
of diesel $3,900
10/11 Sold 2000 bu of corn $4,600
 Enterprise Record System
INCOME EXPENSE ENTERPRISES
Breeding Goats Corn
Date Description Kids Cull Does Corn Feed Supplies Fuel Income Expense Income Expense

10/1 Sold 20 kids @ 65

lbs/hd $1,300 $1,300
10/1 Purchased feed (1 ton) $165 $165
10/3 Sold 2 does @ 75
lbs/hd $105 $105
10/6 Purchased supplies $165 $125 $40
10/8 Purchased 1500 gals of
diesel $3,900 $150 $3,750
10/11 Sold 2000 bu of corn $4,600 $4,600

Contain all the income and expenses associated

with a single enterprise.
 Enterprise Record System
INCOME EXPENSE ENTERPRISES
Breeding Goats Corn
Date Description Kids Cull Does Corn Feed Supplies Fuel Income Expense Income Expense

10/1 Sold 20 kids @ 65

lbs/hd $1,300 $1,300
10/1 Purchased feed (1 ton) $165 $165
10/3 Sold 2 does @ 75
lbs/hd $105 $105
10/6 Purchased supplies $165 $125 $40
10/8 Purchased 1500 gals of
diesel $3,900 $150 $3,750
10/11 Sold 2000 bu of corn $4,600 $4,600

An enterprise can be any crop or type of

livestock produced on the farm.
 Enterprise Record System
INCOME EXPENSE ENTERPRISES
Breeding Goats Corn
Date Description Kids Cull Does Corn Feed Supplies Fuel Income Expense Income Expense

10/1 Sold 20 kids @ 65

lbs/hd $1,300 $1,300
10/1 Purchased feed (1 ton) $165 $165
10/3 Sold 2 does @ 75
lbs/hd $105 $105
10/6 Purchased supplies $165 $125 $40
10/8 Purchased 1500 gals of
diesel $3,900 $150 $3,750
10/11 Sold 2000 bu of corn $4,600 $4,600

Should contain all cash income and direct cash

expenses for that particular enterprise.
 Enterprise Record System
INCOME EXPENSE ENTERPRISES
Breeding Goats Corn
Date Description Kids Cull Does Corn Feed Supplies Fuel Income Expense Income Expense

10/1 Sold 20 kids @ 65

lbs/hd $1,300 $1,300
10/1 Purchased feed (1 ton) $165 $165
10/3 Sold 2 does @ 75
lbs/hd $105 $105
10/6 Purchased supplies $165 $125 $40
10/8 Purchased 1500 gals of
diesel $3,900 $150 $3,750
10/11 Sold 2000 bu of corn $4,600 $4,600

In-direct enterprise expenses are more difficult

to assign.
Types of Expenses
 Direct  In-direct
 Goat feed  Fuel
 Goat medicine  Repairs
 Auction fees  Labor
 Trucking  Insurance
 Seed  Utilities
 Fertilizer  Rent
 Lime
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

No. Total Price Price Gross Sale Net

Date Description Head Weight Per Unit Unit Sales Costs Sales Buyer/Market
4-15 Kids 2 100 125.00 Cwt 125.00 113.00 John Jones
5-2 Cull Doe 1 70 71.75 Cwt 50.23 7.00 43.23 TLP
6-24 Breeding Doe 1 90.00 Head 90.00 90.00 Lazy G Farm
8-20 Kids 25 1625 115.00 Cwt 1868.75 175.00 1693.75 TLP
 Kid Sales Record

Price
No. Total Per Price Gross Sale Net
Date Description Head Weight Unit Unit Sales Cost Sales Buyer/Market
4-15 Kids 2 100 125.00 Cwt 125.00 113.00 John Jones
8-20 Kids 25 1625 115.00 Cwt 1868.75 175.00 1693.75 TLP
 Cull Breeding Stock Sales Record

Price
No. Total Per Price Gross Sale Net
Date Description Head Weight Unit Unit Sales Cost Sales Buyer/Market
5-2 Cull Doe 1 70 71.75 Cwt 50.23 7.00 43.23 TLP
 Breeding Stock Sales Record

Price
No. Total Per Price Gross Sale Net Buyer/
Date Description Head Weight Unit Unit Sales Cost Sales Market
6-24 Breeding Doe 1 90.00 Head 90.00 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 10-
Production & Price
Price Kids Weaned Per Doe
Per Cwt. 1.2 1.3 1.4 1.5 1.6 1.7 1.8
85.00 -1211.28 -990.35 -769.41 -548.47 -327.53 -106.60 114.34
90.00 -1048.78 -811.60 -574.41 -337.22 -100.03 137.15 374.34
95.00 -886.28 -632.85 -379.41 -125.97 127.47 380.90 634.34
100.00 -723.78 -454.10 -184.41 85.28 354.97 624.65 894.34
105.00 -561.28 -275.35 10.59 296.53 582.47 868.40 1154.34
110.00 -398.78 -96.60 205.59 507.78 809.97 1112.15 1414.34
115.00 -236.28 82.15 400.59 719.03 1037.47 1355.90 1674.34
 Kidding Sensitivity Table 11-
Production & Market Weight
Market Kids Weaned Per Doe
Weight 1.2 1.3 1.4 1.5 1.6 1.7 1.8
56.00 -1173.78 -949.10 -724.41 -499.72 -275.03 -50.35 174.34
59.00 -1023.78 -784.10 -544.41 -304.72 -65.03 174.65 414.34
62.00 -873.78 -619.10 -364.41 -109.72 144.97 399.65 654.34
65.00 -723.78 -454.10 -184.41 85.28 354.97 624.65 894.34
68.00 -573.78 -289.10 -4.41 280.28 564.97 849.65 1134.34
71.00 -423.78 -124.10 175.59 475.28 774.97 1074.65 1374.34
74.00 -273.78 40.90 355.59 670.28 984.97 1299.65 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  Veterinary &
 Interest on feeder Medicine
 Feed  Marketing
 Pasture – 6  Hauling
kids/acre  Machinery
 Salt & Minerals  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 AMOUNT PRICE/CWT.
Variable (Cash Expenses) 49.27 75.84
Death Loss 3.25 5.00
Depreciation and Repairs 5.49 8.45
Interest on Buildings & Equipment 1.99 3.07
Labor 6.00 9.24
Total All Costs 66.00 101.59
 Feeder Sensitivity Table 14-
Purchase Price and Sale Price
Sale Price Purchase Price Per Cwt.
Per Cwt. 60.00 65.00 70.00 75.00 80.00 85.00 90.00
85.00 -4.95 -6.73 -8.51 -10.29 -12.07 -13.85 -15.63
90.00 -1.86 -3.64 -5.42 -7.21 -8.99 -10.77 -12.55
95.00 1.22 -0.56 -2.34 -4.12 -5.90 -7.68 -9.46
100.00 4.31 2.53 0.75 -1.03 -2.81 -4.59 -6.37
105.00 7.40 5.61 3.83 2.05 0.27 -1.51 -3.29
110.00 10.48 8.70 6.92 5.14 3.36 1.58 -0.20
115.00 13.57 11.79 10.01 8.23 6.44 4.66 2.88
 Feeder Sensitivity Table 15-
Average Daily Gain and Sale Price
Sale Price Average Daily Gain
Per Cwt. 0.18 0.23 0.28 0.33 0.38 0.43 0.48
85.00 -21.19 -17.56 -13.92 -10.29 -6.66 -3.02 0.61
90.00 -18.75 -14.90 -11.05 -7.21 -3.36 0.49 4.34
95.00 -16.30 -12.24 -8.18 -4.12 -0.06 4.00 8.06
100.00 -13.86 -9.58 -5.31 -1.03 3.24 7.52 11.79
105.00 -11.41 -6.92 -2.44 2.05 6.54 11.03 15.52
110.00 -8.97 -4.27 0.44 5.14 9.84 14.54 19.25
115.00 -6.52 -1.61 3.31 8.23 13.14 18.06 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 A B

 Weaning Weights 75 65
 Weaning Percentage 110 130
 No. Kids Weaned 55 65
 Total Lbs. Weaned 4125 4225
 Lbs. Weaned / Doe
Exposed 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.