Introduction

Private: Setting Directions Introduction

Item 1 of 6

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Meat & Livestock Australia April 23, 2020

Key actions

Set clear goals and objectives for your business and regularly review progress.
Evaluate the current performance of your business.
Explore alternative business strategies, evaluate benefits, feasibility and risks, prioritise and then choose the best options.
Implement the new business strategies, maintain accurate records and regularly re-evaluate performance with expected targets.

Why is setting the strategic direction of your beef enterprise important?

Every business has a plan, whether it’s in your head or written down in a formal document. A written plan helps to clarify your goals and objectives and enables you to communicate with business partners, allowing others in the business to access it too.

Successful business managers plan the future direction of their business in order to achieve their financial objectives, as well as meet social and enviromental goals. Strategic business planning can help you achieve your business goals even in an uncertain and risky operating enviroment.

A good plan is like a road map: it shows the final destination and usually the best way to get there.

Businesses require an investment of time, management skills and money and, on most properties, these are in limited supply. Once the direction of an enterpirse has been set, plans should be regularly reviewed to ensure changing prices, climate, management, and other factors are considered and appropriate responses can be adopted to achieve your goals.

In a beef enterprise, a sound strategic plan:

outlines clear goals and objectives and the steps or pathway required to achieve them
reveals whether it is possible to meet your future needs and goals, as well as those of your family
assists in borrowing money at competitive rates
provides a pathway for improving profitability (ie it should address the key profit drivers) while managing climate variability, so that both the property and beef enterprise is sustainable for the long term
enables flexibility within the enterprise to take advantage of good seasonal conditions and opportunities
provides a structured or disciplined method for considering changes or new options and opportunities for the enterprise
helps communicate the nature of the business when more than one person is involved in ownership, management and/or decision making
improves your ability to predict and plan for threats, risks and more difficult periods.

Setting the strategic direction of an enterprise delivers the following benefits:

Concentrates effort and investment on the important strategies.

The importance of each strategy is determined by its relevance to your enterprise objectives and its ability to deliver on those objectives.

Avoids wasted effort and investment on distractions.

Distractions are a cost to the business and only a disciplined approach to identifying key issues will prevent this waste.

Delivers job satisfaction.

Through clear progress towards your goals and objectives and confidence in your ability to successfully adjust to new challenges.

Provides a framework to maximise profitability, whilst also achieving environmental and social goals.

Setting the strategic direction of an enterprise, through sound business planning does require work, but in the longer term it results in less work.

Enterprise profitability tree

The enterprise profitability tree presents the key areas of a beef production system.

By identifying each aspect of production that incurs cost or generates revenue, the tree can help you assess those components of your enterprise that can be altered to have the most impact on productivity and overall profitability.

Your business plan shapes the productivity and profitability of your beef enterprise by influencing key profit drivers such as:

pasture utilisation
sustainable stocking rate
price per kilogram
kilograms of beef produced per hectare.

Figure 1: Enterprise profitability tree

How does this module assist you?

This module looks at setting and evaluating the strategic direction for your beef enterprise as part of the whole property business. It is the logical starting point for the MLA More Beef from Pastures – Arid Zone Pastoral as it considers the economic merit of options for improving productivity and profitability.

Consider the economic merit of management options to boost productivity

The procedures in this module take you through a planning sequence that sets the direction of your beef enterprise and enables a comparison of business performance from a change in enterprise strategy. This takes account of options that will provide the most profit given your physical and financial resources, your preferred lifestyle and confidence to manage risks.

Careful planning increases the chances of the business being successful

In this manual, profit is defined as return on capital (also known as return on assets managed). This is a base measure of the efficiency of a business without considering the method of financing (interest and loan repayments), taxation and drawings, or profit distribution.

Linkages to other modules

This module sets the initial strategic direction for the beef enterprise, including the planning of goals and objectives now and for the future. It provides a process for exploring strategies, evaluating options and monitoring progress.

The process of managing stock numbers is considered in Module 2: Managing your feedbase and Module 3: Managing your natural resource base.

Information on the selection of markets is outlined in Module 7: Meeting market specifications and Module 4: Cattle genetics provides information that also affects producers’ capacity to supply target markets.

All modules, including Module 5: Maximising weaner throughput and Module 6: Herd health and welfareare critical for plans to be implemented properly to optimise business profit at the same time as managing financial, business, environmental and biological risks.

The same economic principles apply to all enterprises in a pastoral business.

While beef maybe the sole enterprise on a pastoral property, it is can also be run in conjunction with meat and/or wool sheep. There can be competition for shared resources such as labour, land (pasture) and capital, but may also complement each other in the way they are structured and managed. They use common assets, shared labour and the available forage supply.

When the whole-of-business economic analysis has been completed, the most appropriate herd structure, the timing of important management practices and target markets can be determined to maximise profit from a multi-enterprise business.

Principles of setting the direction of the enterprise

Set clear goals and objectives for the beef business.
Determine the enterprise strategy that will best achieve your goals.
Establish a system to monitor and review progress.

Procedures for setting the direction of the beef enterprise

Note: Procedures 1 and 2 may happen in reverse order, depending on how long the enterprise has been established and the level of understanding you have regarding your business’s performance.

Setting Directions

Quizzes