How to prepare your cattle business for expansion

Lee Irvine, Ag Sector Director, Beef & Cattle explains the five essential tips to prepare for growth.

By ATB Financial 6 December 2024 3 min read

At some point in time, every cattle producer's operation comes to a crossroads—maintain the current business plan or pivot and undertake an expansion project. If the time has come to expand, be prepared. There is a fair bit of work ahead. As are a full spectrum of emotions, from excitement to feeling overwhelmed.

While every operation has different needs, all businesses—regardless of industry—can use these five essential tips to prepare for growth.

Five tips to prepare for business growth

1. Identify your “why”

Before committing to expand your cattle operation, you first need to identify your “why”. Why expand? Why now? Is it to bring in the next generation? To scale up current operations? To diversify? To expand into a new segment?

This becomes your purpose and guiding principle for when the project stalls, loses focus or hits a bump. The truth is, every expansion is going to require tradeoffs. Considering each decision against your purpose will keep you focused and give you confidence that the decisions you’re making are helping you achieve your goal.

Your “why” will also help you make decisions around how fast (urgency) and how big (scalability) the expansion should be.

2. Know your numbers

As producers begin to think about expansion of their operation, it is imperative there is a clear understanding of all the numbers. Producers often focus on pounds weaned, average daily gain, grazing days, or other production based numbers.

But when you are planning an expansion, there is another set of numbers that need to be understood. These are:

Debt to equity (D:E)
Debt servicing coverage ratio (DSCR)
Working capital ratios.

This is where a specialized Agriculture Relationship Manager plays a critical role with financial and business advice. Working together, you can gain an understanding of these numbers and create a clear expectation for what is possible (and profitable) for your expansion.

If you don't already have an Agriculture Relationship Manager, we can help with expert sector advice and support.

3. Match your “why” to a business strategy

An expansion offers an opportunity to examine the current business model. Look at where you are, what’s working/what’s not and where you want to put your efforts to achieve your why.

“Often, because we are cow/calf producers or feedlot operators, we think expansion simply means more cows or more bunkspace.” explains Lee Irvine, Ag Sector Director, Beef & Cattle at ATB. “But expansion could also be into a new segment of the industry, such as; purebred, backgrounding, running grassing yearlings, custom grazing or feeding off site.”

Your “why” needs to set you on a path. Your strategy maps the way.

4. Focus on repeat buyers vs opportunity buyers

In the cattle industry, we are predominantly price takers. Meaning we mainly sell our cattle through price discovery (auction). In order to get the top dollar for our product, we need at least two buyers to compete for our calves.

Opportunity buyers will push your calves to the market price. Repeat buyers will bid above the market. And multiple repeat buyers get you top dollar.

As you plan your expansion, it is critical to think about how to gain additional repeat buyers.

5. Build a plan and work the plan

“It is often said that an idea without a plan is just a dream. There’s not one formula for achieving successful growth in your operation. But knowing your “why” and coming up with a solid strategy to achieve your vision of expansion will give you the best opportunity of making it successful,” says Irvine. “Set clear goals, too. You may hit one, or several, roadblocks along the way. But keeping true to your purpose and following your strategy goals (as a reminder or somewhat of a checklist) will help you pivot as necessary and expand your business.”

Plus 1 piece of bonus advice

Whether you’re selling calves through a ring or head days as a custom feeder, be intentional about your marketing plan and be an active participant.

Remember, expansion is a journey, not a destination. It's about continuous improvement, adaptation, and a commitment to building a long-term and profitable future for your cattle business. With careful planning, strategic decision-making, and a focus on your "why," you can successfully navigate the complexities of expansion and achieve your business goals.

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