Those of you employed have the value of your time determined by mutual agreement. My wife and I are full time ranchers and it is a sore spot for me that we work for free everyday. Not only are we not being paid, we are responsible for paying all of our many daily expenses. It is not cheap to ranch. Supplies, parts, fuel, feed, repair materials as well as new project materials, all cost money. Of course we do have ranch income when we sell calves, seedstock cattle, and hay. The paydays are far apart, thus it seems like we are working for free.
The point of this article is how do we value our time? We can calculate our hay field expenses and divide by the hay yield to determine our cost per bale. However, what if we feed this hay to our own cattle? Hay field expenses are many and very real. Cost of herbicide and time to apply. Cost of fertilizer and time to apply. Cost of the actual cutting, raking, baling, transporting, and stacking. All of that also means the cost of owning, maintaining, and operating tractors, baling equipment, trucks, and trailers.
The equipment can be and should be capitalized as opposed to expensed. That means your equipment is losing value every year. Eventually it will all have to be replaced and you need to have the money put back for that purpose. Depreciating capital assets lowers the value of those assets on your balance sheet. Saving an equal amount of cash, to an account to replace those assets, maintains the value on your balance sheet. Hopefully you will be able to have some additional cash to add, that would be your profit, to increase the value on your balance sheet.
I spend a lot of time and money fixing flats. I have lost track of how many tires I have. Almost every time I want to do something, I have to add air to a tire. I buy new heavy duty tires and use a high quality sealant, but still always have tire issues. Turns out that natural rubber is almost impossible to come by anymore, thus tires are made out of synthetic rubber now. I, for one, think the quality of synthetic rubber is far less. Anyway, how do I get reimbursed for all of my lost time dealing with flats? If I was paid by the hour, it would not matter. Working for myself, it does matter.
I have not met a client yet that likes to be nickeled and dimed to death. If I put a surcharge on all of my invoices for flats, that would be extremely unprofessional. Those types of expenses, and many more, come under the umbrella of overhead. In my world, overhead is not calculated, it simply comes out of revenue. Notice, I did not say it came out of profit. Profit is not guaranteed in the ranching business.
Any cost involved in raising calves, kept over one year, must be capitalized and depreciated. Just like your tractor, eventually that cow or bull will have to be replaced. It is not easy to separate out of your cattle expenses, those cost that should be capitalized. Your checkbook is generally used to pay for your expenses. That is not true when you are writing a check to pay for cotton seed mill to feed young replacement calves and seedstock calves that you are weaning and plan on keeping past their first birthday.
When I sell a two year old Brahman bull for $5,000, that is how we pay for our capitalized assets, annual expenses, overhead, and hopefully some is left for profit. Remember, that two year old bull is covering two years of cost, so half of that 5k is going for the previous year.
My point is, our time is valued depending on the difference between our annual gross revenue, depreciation, and expenses. If any money is left, that is our profit. Then we divide our profit by 52 weeks per year, divided by 2 for my wife and I, and that is how I value my time, per week, on paper.
In reality however, I value my time to be worth much more. I am 58 years old and consider myself very lucky to still be here. Time is something limited to all of us. It bothers me to see young people waste so much time. Life will pass you by if you let it. The clock is always ticking. I have already accomplished far more than I ever thought was possible. My lucky break was my wife, Marye. There is no way I could have accomplished all that I have without Marye and all of her hard work and support. So, how do I value my time? By how much of it I can spend, with my great wife, here on our fabulous ranch.
Brett Bickham
Clifton, TX