Applying business management principles and decision tools to optimise the enterprise mix
| Date: 14 Jun 2008
Philip O’Callaghan. Business advisor and coach to Broadacre crop/livestock managers in South Eastern Australia, based in Bendigo, Victoria.
Grain prices at 2007/08 levels provide an opportunity to increase crop intensity and production with a reduced financial risk and higher financial reward, however cost control and monitoring remains the key to business success.
- Whole of business Benchmarks
- Enterprise Analysis benchmarks
- Seasonal and commodity price forecasts
- Budgeting and ‘what if’ scenarios
- Risk Tool for personal risk profiles
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Yield t/ha
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Price $/t
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Costs $/ha
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Cereals
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Oilseed/Legumes
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Cereals
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Oilseed/legumes
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Whole Business
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90% Crop
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3.0
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1.5
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240
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450
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560
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65% Crop
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3.0
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1.5
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240
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450
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450
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763
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700
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640
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203
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80
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592
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600
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90% Breakeven
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$/ha
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-51
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142
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500
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498
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509
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48
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65% Breakeven
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-46
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400
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404
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Budget
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Income Down 20%
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Income Up 20%
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Average per year
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Land Values
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5.5%
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Farm Debt
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12%
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Farm Production Value
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7%
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Crop Intensity
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5%
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Farm Costs
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4%
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Farm Profit
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No change
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1. ORM Business Health Indicators- 10 year Averages
Profit Drivers
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Unit
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ORM Guideline
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Water Use Efficiency
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Cropping- Crop more than 80%
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$/ha/100mm
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80-120
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Mixed- Crop less then 70%
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$/ha/100mm
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50-90
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Less costs
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Farm Input Costs
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% to Farm Income
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40-30
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Machinery Costs
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% to Farm Income
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30-20
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Labour Costs (includes all labour)
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% to Farm Income
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25-15
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Financing Costs
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% to Farm Income
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12-5
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Surplus
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% of Farm Income
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10-20
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2. Whole of Business Key Performance Indicators (KPI’s) provide an overview of success.
(10 year average)
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Unit
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ORM Victorian
Average
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ORM Victorian
Top 20%
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Return on Capital
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%
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4.0
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9.5
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Change in Net worth
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$/Business
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125,000
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270,000
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Farm Profit (after all labour and interest)
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$/Business
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43,000
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227,000
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1) Business Life Cycle
2) Seasonal Variations
Figure 3: Rainfall vs. Yield- Australia, ABARE3) Others
3. Profit to wealth converters
4. Actions
Contact details
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