Let's Discuss Breakevens, or More Appropriately, Breakprofit

I have been given the opportunity to work with two of the wisest folks in the cattle business, Bud & Eunice Williams. Many of you may be familiar with Bud & Eunice from their revolutionary Stockmanship Schools, but they are also the creators of a brilliant cattle marketing method and Marketing Schools which I have been asked to be a part of. One of the most important concepts that Bud & Eunice have taught me is the fallacy of the “breakeven.”

The breakeven has been elevated to the focal point of our entire industry. Think about it. How do you think and talk about your cattle? In terms of their breakeven, I’ll bet. I’m guilty as sin, too. Whenever anyone has called or emailed me to talk about risk management for their cattle, what has been the first question out of my mouth? “What’s the breakeven on those cattle?” I have dutifully asked. No more, friends. The word “breakeven” is pretty much a profanity in my book now. It is a recipe for failure and a glorification of mediocrity.

If you think about it, to breakeven is the same as zero cash flow. Zero cash flow is failure. No two ways about it. Failure. Sure, you might be able to hold on for a while with zero cash flow as you bleed down your cash reserves, but you’re eventually going down. You can drop a man in the middle of the ocean, and he’ll dog-paddle for a day or two, but he’s going down too. It is this standard of failure which our entire industry revolves around. Does anyone else see the need for a change in thinking here?

The reason we all do what we do is to generate a profit. There’s nothing wrong with that. Capitalism is a keystone of our civilization. So, why do we as industry act as if we’re a bunch of non-profit organizations, ceding profit in our most basic accounting? I don’t know. I don’t know where it all started, and it really doesn’t matter. All that matters is where we go from here.

The first thing we have to do is factor profit into our cost structure, no matter what sector of the cattle business we’re in. Profit is 100 percent necessary to our businesses; therefore to leave it out of our cost structure would be a massive oversight, tantamount to a trucking business failing to include diesel in its cost structure. We shouldn’t factor in exorbitant profits, just reasonable profits. The resulting figure would be, if I may contribute a new word to the nomenclature of our industry, a “BREAKPROFIT”. A breakprofit is the amount you need to clear a reasonable profit. That’s your benchmark – not the failure of a breakeven.

In retrospect, it all seems so “common-sense”. But, we all need to have common-sense concepts imparted to us from time to time. Common sense ISN’T so common, you know. If you’re interested in learning more about the Williams Marketing Method, visit our new website, www.BudWilliamsMarketing.com . What we have just discussed is but the tip of the iceberg, and I couldn’t be more excited to be working with Bud & Eunice Williams to share these outstanding business concepts with the cattle industry. And from now on, if you want to ask me about managing risk, the first thing I’ll ask you is, “What’s the breakprofit on those cattle?” Will you have an answer?©