By Stephen Severe
Some of you who have a lot of gray in your hair will identify with this saying, the rest of you will wonder if the baby can actually go down the drain.
Enterprise accounting is an ideal way to understand the strength and weaknesses of your operation. For your enterprises to work ideally you need to understand the individual enterprises in depth. Especially those enterprises that are interrelated.
When I say interrelated, I mean those which in reality coexist together for the benefit of one or both. For example when I was growing up in southern Idaho we rotated potatoes, wheat, barley or oats. The enterprises were interrelated because we couldn’t plant potatoes after potatoes like we wanted to. So to grow potatoes we rotated a grain crop. The grain enterprise didn’t always make money. But, we would not stop using the grain enterprise because of the contribution to the potato enterprise.
Many agricultural operations have interrelated enterprises. Here at the Padlock Ranch we have a cow-calf enterprise, a grower yard enterprise, and crop enterprises. They are all interrelated. We raise most of our forage on our farm ground. The calves we background come from our own cow-calf enterprise. We have struggled with how to measure each enterprise’s contribution to the ranch. We don’t have local crops grown around us. If we did they could take the place of our farming enterprises. Therefore our crops are mostly grown to go through the grower yard and or the cow-calf enterprise. Because we have feed enterprises, we tend to background our own calves.
Because we have a cow-calf enterprise, we tend to grow forage crops. We continue to look at these interrelationships to determine if these enterprises are contributing individually and as a whole. We also evaluate them to see if another approach would be more beneficial.
Another factor to consider is what effect is there on your overhead and on your equipment pool if you discontinue one or several of your enterprises. We have to remember that unless you are willing to and can get rid of the overhead and equipment carried by an individual enterprise the other enterprises will have to bear that overhead cost.
