holistic management financial planning
DESCRIPTION
Holistic Management Financial Planning - by Kirk Gadzia. See the blog at http://carbonfarmingcourse.blogspot.com for details.TRANSCRIPT
Holistic
Management
Course
August 24-30
The Farm,
Summertown, TN
Facilitated by:
Kirk L. Gadzia
~ P.O. Box 1100 ~ Bernalillo, NM 87004
Phone 505-867-4685 ~ Cell 505-263-8677
Email: [email protected]
Web:
www.resourcemanagementservices.com
Kirk L. Gadzia• ~ P.O. Box 1100 ~ Bernalillo, NM 87004
• Phone 505-867-4685 ~ Cell 505-263-8677
• Email: [email protected]
• Web: www.resourcemanagementservices.com
Holistic
Management
Financial Planning
Why Financial Planning?
Why Financial Planning
Why Financial Planning
Profit Paradigm
PRICE
COST OF PRODUCTION
DIFFERENCE
IS
PROFIT
NO CONTROL OVER PRICE OR COSTS
PROFIT IS OUT OF OUR CONTROL
Profit ParadigmPROFIT OUT OF OUR CONTROL BECAUSE:
1. Prices are too low for the products produced.
2. Our costs to produce the products are too high.
T rue o r F a ls e ? American farmers and ranchers enjoy
some of the best opportunities in the world for profit.
•They receive some of the highest prices in the world
for the raw agricultural products they sell.
•They pay some of the lowest prices in the world for
most of the inputs needed to farm or ranch.
NEW Profit Paradigm
DIFFERENCE
IS
PROFIT
Responsibility for PROFIT is entirely ours!
PRICE
Demand
Marketing
Creativity
COST OF PRODUCTION
Determination
Management Attitude
Creativity
Self - DisciplinePlanning
Which Farm is More Profitable?� � � � � � � � � � � � � � � 1. 45 Bushes per Acre 2. $75,000 Taxable Profit3. .5% Organic Matter Loss4. 1 Ton / Acre Soil Loss
� � � � � � � � � � � � � � � 1. 40 Bushes per Acre 2. $55,000 Taxable Profit3. .5% Organic Matter Gain4. Zero Soil Loss
Which Farm is More Profitable?Farm A: 1000 Acres
• 1 Ton Soil Loss @ 0.5% Organic Matter (OM)= 100,000 lbs. OM on 1,000 Acres
• 100,000 lbs. OM = 60,000 lbs Organic Carbon• At Normal Carbon:Nitrogen Ratio = Nitrogen Equivalent of 50,000 lbs• Estimated Cost of Nitrogen @ $.50 / l b. • $.50 x 50,000 lbs. = $25,000 or $25 / Acre to Replace Lost Nitrogen
Farm B: 1000 Acres
• .5% Organic Matter Gain = $25,000 Gain, by Above Calculations
Aeration? Water Holding Capacity?Drought Resilience? Trace Minerals?
Soil Life?
• Farm A: $75,000 Profit - $25,000 N Loss = $50,000 Net • Farm B: $55,000 Profit + $25,000 N Gain = $80,000 Net
Sources of Wealth
Does the Source Matter?
But: =
Where did the Wealth Originate?
CAN BE USED IN A CYCLICAL OR A CONSUMPTIVE
ENERGY DERIVED IS POTENTIALLY DAMAGING
MANNER OR TO BUILD INFRASTRUCTURE
EXAMPLES: OIL, GAS, COAL, GOLD,
SOIL, FORESTS, WILDLIFE.
DIAMONDS
HUMAN CREATIVITY
PLUS ORGANIC OR
MINERAL RESOURCES =
MINERAL $
HUMAN CREATIVITY
PLUS TRANSACTIONS
CAN BE CREATED OR LOST OVERNIGHT.
STABILITY, SUBSTANCE, OR VALUE
DEPENDS ON CONFIDENCE OF SOCIETY
IN GOVERNMENT AND BANKING .
EXAMPLES: STOCKS, LOANS, SALARIES,
FUTURES, LAND SPECULATION, ETC.
PAPER $=
HUMAN CREATIVITY PLUS
CONSTANT SOURCES OF ENERGY =
ENERGY NOT KNOWN TO
ENDANGER ENVIRONMENT
ONLY FORM OF WEALTH WHICH
CAN SUSTAIN PEOPLE
SOLAR $
EXAMPLES: SUNLIGHT, WIND, WAVE ACTION,
GEOTHERMAL , GRAVITY
The 4 Human Tendencies1. Allow Production Costs to Rise to Anticipated Income
2. Borrow Against Anticipated Income
3. Spend Minimal Time Planning on Paper
4. Monitoring Efforts Too Late or Non Existent
Planning for Non-Profitability
Normal Income Rises Income Drops
Expenses
Income
Interest
Planning for A Profit
Planned Income $400,000
Expense Allocation Cap 50-75% of Income
Planned Profit 25 - 50% of Gross Income
� � � � � � � � � � � � � � � �With High Debt Service
Planned Gross Income $400,000
Planned Profit 25 - 50% of Gross IncomeAfter Debt Service Paid
Expense Allocation Cap 50-75% of IncomeAfter Debt Service Paid
Debt Service $150,000
The Monthly WOTB! =
Working On The Business – Monthly Meetings
Step 1. Always Begin by Reviewing the Holistic Goal
Step 2. Keep Meeting Focused on Strategic Items
•Test Your Proposed Actions Against Your Goal
•Make a Plan for Specific Actions That Pass The Tests
•Make a Timeline for Completion
•Decide Who Will be Responsible for Seeing That Action
is Completed
Step 3. Review Commitments and Actions
and Set Date for Next Meeting.
The Big Yearly WOTB! =
Working On The Business
Step 1. Having a Holistic Goal in Place
Step 2. Using the Holistic Mgt. Decision Making Process –
Testing Your Decisions Against Your Goal
Step 3. Planning the Planning – Laying the Foundation
• Creating Ownership – Who is Involved?
• Overview and Scheduling
1. Preliminary Session – ID
2. Gathering Information
3. 1-2 Day Planning Retreat
1. Final Session to Adjust and Schedule
Q: If I Pull Hard Enough
On This Chain – Where
Will It Break?
A: The Chain Will Always
Break At the Weakest
Link!
Q: If I Repair That Link In The
Chain and Pull Again –
Where Will It Break Now?
A: The Chain Will Always
Break At the Weakest Link!
Resource
Conversion
Product
Conversion
Marketing
(Money)
Conversion
Sunlight
and/or raw
resources
including
money and
creativity
Products
and/or
services
Marketing
of
Products
and/or
services
The Weak Link in Creating New Wealth
Resource
Conversion
Product
Conversion
Marketing
(Money)
Conversion
Conversion
of Sunlight
Through
Plants
(Pasture,
Crops, etc.)
Conversion
of Plants to
Meat,
Wildlife,
Hay, Grain,
etc.
Marketing of
Agricultural
Products
Changing
the
The Weak Link in Agricultural Operations
Resource
Conversion
Conversion
of Sunlight
Through
Plants
(Pasture,
Crops, etc.)
The Weak Link in Agricultural Operations
Possible Items to Check
In A Livestock Operation:
•Not Enough Grass
•Few Paddocks
•Poor Control of Livestock
•Too Many Herds
•Poor Drainage or Water Cycle
•Plant Diversity Low
•Lack of Litter Cover
•High Supplement Cost
•Low Soil Fertility
•High Levels of Brush or Weed
Invasion
•Riparian Areas Degraded
Product
Conversion
The Weak Link in Agricultural Operations
Possible Items to Check
In A L ive s to c k O p e r a tio n :
•Unused forage
•Unused forage for other species
•Poor Conception
•Poor Gains
•Poor Genetics
•High Mortality
•High Predation
•Low Enterprise DiversityConversion
of Plants to
Meat,
Wildlife,
Hay, Grain,
etc.
The Weak Link in Agricultural Operations
Possible Items to Check
In A Livestock Operation:
•Low asset turnover – few
marketing opportunities
•Low relative prices
•Insensitivity to demand
•Poor knowledge of market
•Poor quality
•Low sales effort
•Low Enterprise Diversity
Marketing
(Money)
Conversion
Marketing
of
Products
and/or
services
Resource
Conversion
Product
Conversion
Marketing
(Money)
Conversion
Q: Where
Should I
Reinvest
The
Money?
The Weak Link in Agricultural Operations
A: The Chain Will Always
Break At the Weakest Link!
=
Planning For Profitability
O N D J F M A M J J A S O N D J F M
Plan
A
Profit
Monthly
Monitor &
Control
Replan
For Next
Year
ProfitPlan Tax
Consequences
Three Phases of Annual
Wealth Generation Plan
Mechanical
Paper & Computer
Psychological
“Attitude”
Holistic Management
Decision Making Process
Expense Categories
A. Items That Generate New Wealth
B. Inescapable Expenses
C. Maintenance Expenses
D. Wrong Expenses
Principle of Allocating ExpensesA. Allocate $ First –100% of Needed Amount
B. Inescapable Expenses – Allocate 2nd
Are These Really Inescapable? Minimum Amount Necessary.
C. Maintenance Expenses – Allocate Last, Brainstorm Ways to Reduce. Minimum Amount Necessary.
D. Waste of Time and $ - Eliminate!Treating Symptoms and Non-Weak Link Items
6 Keys To Profitable Ranching
1. Wholistic or Integrative Approach
2. Continuous Improvement of Key Resources
3. Use of Planning Tools
4. War on Costs / War on Work
5. Emphasis on Marketing
6. Diversity
A. Land B. Livestock C. People
A. Financial B. Land and Livestock C. People- Time Mgt.
A. Income B. Biological C. People- Ideas
Holistic
Management
Course
August 24-30
The Farm,
Summertown, TN
Facilitated by:
Kirk L. Gadzia
~ P.O. Box 1100 ~ Bernalillo, NM 87004
Phone 505-867-4685 ~ Cell 505-263-8677
Email: [email protected]
Web:
www.resourcemanagementservices.com