Stan Parsons wrote, “If you want to be a cowboy get a job.” A business owner’s job isn’t to put up hay, work cattle, or build fence. It is to build a business.
We hire employees to produce results that contribute to customer and owner value. When business owners hire themselves to work in their own businesses, it’s different. You might think that by hiring yourself you’ll save money, but owners should be paying themselves whatever it would cost to replace themselves. Like their employees, business owners should be fairly compensated for the results they produce, but they need to produce different results than their employees.
Rather than focusing on customer and owner value, business owners must focus on documenting how the business produces customer and owner value. They need to create systems through which others can produce those results consistently.
In the E-Myth Revisited, Michael Gerber explains that the true product of a business is the business itself and that the primary purpose of creating a business is to sell it!
At first you might think these principles don’t apply to ranching. I doubt that when the next generation assumes ownership of the family ranch, it’s with the intention of selling out. But if your ranch is a business, Gerber’s principles do apply.
Imagine you have a truck that you’re going to sell. Before you put a “For Sale” sign in the window you’ll probably tune it up and wash it. You might even get it looking so good and running so well that you have second thoughts about selling it.
Gerber isn’t insisting that you sell your business. He is suggesting that you treat your business like that truck, tuning up it up so that it runs so well that you could sell it. But, because it runs so well, you decide to keep it.
Most ranches are not sold as businesses. They are sold as collections of very expensive assets. A business is more than the hard assets it owns. A business includes the systems through which those assets are used to produce customer and owner value, including cash flow and sustainable profit. It is the owner who is responsible for creating those systems.
Those systems might be step-by-step procedures for working cattle at branding, sending out a client newsletter, or holding WOTB meetings. The system could also be a simple checklist for making operational level decisions (e.g. When do we move the herd to another paddock? What are the selection criteria we use for bulls?).
Want to keep the business in the family, generation after generation? Then build it as though you were going to sell it!