The three pillars of business performance

17 June 2016

Producer participants at the first ever BusinessEDGE course in southern Australia learnt about the three pillars of business performance, with one participant saying she learnt more about finance in two days than in the last two decades.

BusinessEDGE aims to develop the skills of livestock enterprise owners and managers in understanding the health and overall long-term sustainability of their grazing business.

BusinessEDGE presenters and agricultural consultants Dr Phil Holmes and Ian Maclean said the three pillars of business performance are:

  • The income statement: Provides information about earnings before interest and tax after variable and fixed expenses, profit and loss, as well as reflecting changes in inventory
  • The cash flow statement: Describes liquidity, which tells you about the ability of the business to meet day-to-day expenses
  • The balance sheet: Sets out the business’s assets, liabilities and therefore the owner’s overall equity in the business. Phil said the equity of a healthy, sustainable business should be at 85% or higher in the long-term.

With these three pillars in place, business owners are well placed to assess strengths and weaknesses as well as trends in profit, cash flow and equity for a period. A business in a healthy position will be able to demonstrate strong cashflow, good profits and growing equity.

Testimonials

The response from the participants of the Victorian launch of BusinessEDGE in Bairnsdale was extremely positive, confirming how valuable this knowledge is to owners of grazing businesses.

Jane from Briagolong responded “Thanks so much for organising the course. I’ve learnt more about finance in the last two days than in the last 20 years”

Leo from Nicholson said “…I just wanted to let you know that it’s the best money I have ever spent and thanks”.

All elements of the workshop evaluation were rated in excess of nine out of 10.

Next steps

If you are managing a grazing business and want to ensure it is capable of providing you, your family and partners with a reasonable rate on return on your valuable capital investment, rather than just a busy job, you can register for the next BusinessEDGE course in your area.

The ‘Setting Directions’ module of MLA’s More Beef from Pastures is also a great place to obtain some clear and concise information about how producers can set clear business objectives and the strategic direction of their grazing enterprise. This module also has some great tools including business plans, partial budgeting and a cost of production calculator.

For sheep producers please find attached the link to the 'Plan for Success' module in Making More from Sheep.

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