1 - Setting directions

Key actions

  • Set clear goals and objectives for your business and regularly review progress.
  • Evaluate the current performance of your business.
  • Explore alternative enterprises and strategies, evaluate benefits, feasibility and risks, prioritise and then choose the best options.
  • Implement the new enterprise strategy, 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 allows others in the business to access it too. 

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

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 farms, these are in limited supply. Once the direction of an enterprise 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 business 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 (eg it should address the key profit drivers) while managing climate variability, so that the farm and beef enterprise is sustainable over the longer term
  • improves your ability to predict and plan for threats, risks and more difficult periods
  • provides flexibility within the enterprise so as to take advantage of better than expected 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 or decision making.

Setting the strategic direction of an enterprise delivers many 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 wasteage.
  • 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 while achieving environmental and social goals.

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

Enterprise profitability tree

The enterprise profitability tree (Figure 1) 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:

  • increased pasture utilisation
  • stocking rate
  • price per kilogram
  • kilogram of beef produced per hectare
Figure 1: Enterprise profitability tree

beef enterprise profitability tree
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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 farm business. It is the logical starting point for the MLA More Beef from Pastures package 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 the range in 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 chance 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 manipulating stock numbers is considered in Module 2: Pasture growth and Module 3: Pasture utilisation. Information on the selection of markets is outlined in Module 7: Meeting market specifications and Module 4: Cattle genetics also affects producers’ capacity to supply target markets.

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

The same economic principles apply to all enterprises in the farming business.

The pasture-based beef enterprise is rarely the sole enterprise of an Australian farm business. Most consist of several inter-related enterprises such as sheep, cropping and fodder conservation for use on the farm or for sale. These enterprises compete for shared resources such as labour, land (pasture) and capital, but may complement each other in the way they are structured and managed. They use common assets, shared labour and the available forage supply.

The focus of this package is the pasture-based beef enterprise. The principles of economic analysis need to be applied across all enterprises within the farm business to ensure that the competition and supporting links between enterprises are accounted for and managed.

Evaluate all significant changes planned within the pasture based beef enterprise to assess the impact on the whole farm business. When the whole-of-business economic analysis has been completed the most appropriate herd structure, timing of important management practices and target markets can be determined to maximise profit from a multi-enterprise business.

Principles of setting 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