Adventures with Lyrical: Buying a Business (REPOST)

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Tmac

Adventurer
<Aristocrat╭ರ_•́>
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The high intensity grazing stuff is fascinating to me but I don't have enough fences or manpower to make it work right now. I am working on cross fencing some of my larger pastures so I can manage grazing more actively but it's expensive and a lot of work, especially since some of my pastures are currently 6-8 square miles and in rough country.
Well, they don't use traditional fencing. My uncle uses a sort of mobile fence; a single piece of electric wire. He moves them to a different section of the field twice a day and pretty much removes any need to cut hay.

He maintains the larger fencing, but inside of that, it's all electric fencing that's mobile. He uses plastic stakes to hold the fencing in place and rides a 4-wheeler around the edge of the micro-fields when moving them to simplify the process.

Of course they're almost a 10th the size of your operation, so maybe it doesn't scale? No idea how long moving fencing on that scale would take with up to 900 head at once.
 

BrutulTM

Good, bad, I'm the guy with the gun.
<Silver Donator>
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I think it would scale, I just don't have the manpower or infrastructure to attempt it on the whole ranch, but I have heard nothing but good things about it and I am trying to implement the principles as much as I can. What does your uncle do for water? Is he set up so each paddock has water in it somehow or does he have a water truck he moves around or what? On a hot day cows can drink as much as 30 gallons of water each so that's not a trivial thing.

Moving them twice a day is pretty intense. I know some people that move their cattle every 2-3 days. It sounds like your uncle is making the most of his land though.

Also in Montana you could never completely get rid of feeding hay in the winter just because the grass will go dormant once the temperature drops to a certain point and if there's 2 feet of snow on the ground the cows aren't going to be able to graze no matter how much grass you have.
 

Tmac

Adventurer
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I think it would scale, I just don't have the manpower or infrastructure to attempt it on the whole ranch, but I have heard nothing but good things about it and I am trying to implement the principles as much as I can. What does your uncle do for water? Is he set up so each paddock has water in it somehow or does he have a water truck he moves around or what? On a hot day cows can drink as much as 30 gallons of water each so that's not a trivial thing.
He has a couple of creeks that run across the property, so I think the second move is always by the creek. There's also a nice SMZ (streamside management zone) or tree line along the creeks for shade. So, it's a pretty optimal situation. He doesn't use any water trucks, I know that for sure.

Moving them twice a day is pretty intense. I know some people that move their cattle every 2-3 days. It sounds like your uncle is making the most of his land though.

Also in Montana you could never completely get rid of feeding hay in the winter just because the grass will go dormant once the temperature drops to a certain point and if there's 2 feet of snow on the ground the cows aren't going to be able to graze no matter how much grass you have.
I think they diversify their grass with clover for seasonal nutrients and other grasses that grow well during the winter, so they're able to maximize grazing year round. I could look into it. I know he's helped a lot of people in his area to get into it and has traveled around the country to meet with farms that do it year round as well, so he's pretty versed.
 

Shonuff

Mr. Poopybutthole
5,538
791
Now that we are one month away from year end, and based on backlog, I can forecast the calendar year numbers. Sales will be 791k, profit will be 229k.
And the final results for 2013 for sales was $774,191, and a profit of just barely above 200k. We had an engine explode that cost me $15k right at the end of the year (it had to be rebuilt), and we didn't hit the sales goal because we lost seven or eight days in December that we were snowed out. They are horrible about plowing here, and we had to wait a week for it to warm up to get the ice off of the roads.

The phone has been soft since Thanksgiving, and Youngblood's closing rate has dropped to about 30% (it's usually 50). So while we have work, it's gotten soft. I could cut down to a crew and a half until March, but I'm really not wanting to do that. We'll have to fight harder. We are sending out mailers to people that haven't had their work done yet (phone verified), from what we bid. There is roughly 560k in work. We'll offer 10% discounts. On top of that, my new TV campaign started. Today was the first day of it, we jumped to two other TV networks. We ran 18 spots this morning between three networks on the news casts.
 

Shonuff

Mr. Poopybutthole
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791
That's all normal this time of year though right?
It is, but it's not normal for me to run fully staffed this time of year. Last year, a guy got caught stealing (dismissed on the spot), and another guy decided he wanted to visit family cross country (he came back in May). I didn't replace them with new hires.

Altruism aside, it took until May to get a good team going, and it took them until June to figure out how to be productive. I'd like to avoid that this year, as we were slammed from March on. In other words, when the market starts going up, I want to be able to capitalize on it ASAP. I have a good team, and don't want to take three months weeding through new hires that are no good.
 

opiate82

Bronze Squire
3,078
5
we didn't hit the sales goal because we lost seven or eight days in December that we were snowed out. They are horrible about plowing here, and we had to wait a week for it to warm up to get the ice off of the roads.
Sounds like you should invest in some chains and keep the crews working!
 

Shonuff

Mr. Poopybutthole
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791
I've been busy. The TV ad campaign is working, in the last week, we received almost as many calls as we did for all of Jan 2013. As I've said before, Winter in my business is usually a big loss. But we are now on three TV networks, and it's having an impact. 1/3 people that call in are saying they are seeing us on TV. The last two weeks, we picked up 18k and 25k in new contracts. I'm not expecting to make a profit, but at least I'm not laying off people, and I'm not losing my ass. I've had Winters where the company lost 50-100k. This Winter, I'm not expecting to lose more than 15k. We have a good portion of February booked already, and March is when sales starting increasing by 30-40%.

When I bought the company, people in the industry told me that I should expect to lose money in this time, and layoff people. I don't accept that. More advertising = more sales. I'm spending 20k this month in advertising, but because I'm spending such a large amount, I've been able to strong arm the media companies into giving me better rates/free spots. 20k seems a lot, but at least I'm not losing 25k a month. The advertising is an insurance policy against lack of sales. Margins are lower because we are offering a 10% Winter discount (we close 25% of our customers on this), that combined with more Marketing dollars = lower margins.

I'm continuing to tweak things for Spring market. Internet is an area I can do better in, and I'm working on that every day. We've been picking up work off of Angie's List, apparently some customers gave me a perfect rating on there. I'm going to talk to them about doing some advertising.

If we don't lose money this Winter, I'm expecting that the company will make 300k net this year (or maybe more), because we don't have a big loss this Winter. We could probably do better, but I'll need more equipment.
 

Shonuff

Mr. Poopybutthole
5,538
791
Update, we made it to Spring market (it feels like Spring anyway), and we only lost about 20k over the Winter. Half of that was from a catastrophic failure in one on the truck engines. We lost about 20k due to lost days (where we couldn't get on the road). Factor out the catastrophic failure and the excess lost days, and we would have made like $5 over those months, which I'd be happy with.

I think I've documented over the years here and on FOH, Winter can be brutal. Many companies don't make it to March. It's like in GoT, "Winter is coming." We've had Winters where I lost 100k over four months (Dec, Jan, Feb and Mar). So I'm very pleased that we only lost 19k in profit for those months. We can make that up in March. I'm expecting that after I pay myself and all other expenses, we should make 15k.

Instead of cutting expenses to the bone and losing my ass, I actually increased spending in advertising (at 20k a month) and I kept payroll at 25kish a month. We also gave 10% discounts. Now that the advertising is at a more reasonable level (14k) and the discounts are over, things should get back to normal.

The goal was to get off of the cycle of making money in nine months, and then losing 50% of that over the Winter months. Mission accomplished. Over the last three years, as ad spending increased, Winter losses decreased substantially.

Maybe I can look at my other goals of doing other businesses now. We finally don't have a huge hole to dig out of. And since I'm running fully staffed, it's not going to take me until June to build up the crews. No one was laid off. So we should be able to get peak profitability starting in March, and not in Summer.
 

Shonuff

Mr. Poopybutthole
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If anyone cares:

2009 Winter Loss: Gain of about 80k (State was declared a natural disaster, we did emergency work from January until April). We spent about $300 a month in advertising.

2010: Winter Loss of about 100K (we spent about $300 a month in advertising).

2011: Winter Loss of about 60k (1.5k in monthly advertising)

2012: Winter Loss of 40k (7k a month in advertising)

2013: Winter Loss of 19k (20k a month in advertising). And most of the loss came from an engine that cost 15k to rebuild (paid over two months) and about 12 lost days to weather.

Over the years, as ad dollars increased, we only lost money due to being snowed or iced out. The other years, we ran out of work and everyone had short paychecks. This last year, had we only lost three days less, our loss would have been halved to 10k total. And hours for the guys (over the last few years) have gone from 20 a week to "boss, I don't want to work this weekend."
 

Citz

Silver Squire
180
8
If anyone cares:

2009 Winter Loss: Gain of about 80k (State was declared a natural disaster, we did emergency work from January until April). We spent about $300 a month in advertising.

2010: Winter Loss of about 100K (we spent about $300 a month in advertising).

2011: Winter Loss of about 60k (1.5k in monthly advertising)

2012: Winter Loss of 40k (7k a month in advertising)

2013: Winter Loss of 19k (20k a month in advertising). And most of the loss came from an engine that cost 15k to rebuild (paid over two months) and about 12 lost days to weather.

Over the years, as ad dollars increased, we only lost money due to being snowed or iced out. The other years, we ran out of work and everyone had short paychecks. This last year, had we only lost three days less, our loss would have been halved to 10k total. And hours for the guys (over the last few years) have gone from 20 a week to "boss, I don't want to work this weekend."
There are a lot of IFs in what you say. At that point, shouldn't you just be including these factors, which you have no control with, in your projections? I mean, snow/ice will always happen and your trucks/machines will keep breaking.
 

Shonuff

Mr. Poopybutthole
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791
There are a lot of IFs in what you say. At that point, shouldn't you just be including these factors, which you have no control with, in your projections? I mean, snow/ice will always happen and your trucks/machines will keep breaking.
There's no way I could have forecasted the amount of snow, it was a record amount in this state since they recorded it. Also, in six years, it was the first time we had to rebuild an engine (it was 15k).

I'm happy with this last Winter, but we can do better next year. At 20k in advertising for the month, there was no room for lost days. That's more than the Fortune 100 company I worked for spent in this area in a given month.

I'll shoot for 0 next year, we'll see. It's not a science, it's not an art, it's art and science. If I could perfectly smooth demand, I'd be a lot wealthier.
 

Shonuff

Mr. Poopybutthole
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791
How's young blood doing?
He's starting to expect a management position, but his technical and organizational skills are not where they need to be. He's still working on his certs. He's fitting in better with the guys, they listen to him when he's on the job. He's still my project.
 

Tarrant

<Prior Amod>
15,895
9,294
He still generating money? I seem to remember you had another supervisor that couldn't understand why you hired him... Or maybe that was the whole crew... I seem to remember one person specifically has questions about it.

Glad the team as a whole is doing better with him, it doesn't take a genius to see that he was contributing in keeping them employed.
 

Shonuff

Mr. Poopybutthole
5,538
791
He still generating money? I seem to remember you had another supervisor that couldn't understand why you hired him... Or maybe that was the whole crew... I seem to remember one person specifically has questions about it.

Glad the team as a whole is doing better with him, it doesn't take a genius to see that he was contributing in keeping them employed.
We all see he can contribute to the team. But now he's thinking he's going to be made Assistant Manager. In the previous times when I had a Manager and Assistant Manager, they all had at least ten years' experience. This guy has one year's experience, at the most.

He's expecting me to hand him the crown, but he's not organized (loses jobs that the guys have done for the day) and is low on technical skills. Towards the end of last year, he blew out an engine because he didn't know how to check the fluids properly. It had to be completely rebuilt. And yesterday, he was on a $35k piece of equipment and it broke down while he was on it. Mind you, the machinery has less than 200 hours on it, and it never breaks down on anyone but him.

He values himself too highly for what he does. He's a good salesman. It's weird, his close rate is either 100% or close to 0%. When he's on a roll, he can sell anyone. When he's not, he sucks. He had two months (albeit in the slower times) where he was only selling 3k a week. At his best, he closed 30k a week.

His ego needs reeled in, there's not enough room for the rest of us. The last few times my Manager went out and sold against him, the Manager beat him 75% of the time. Yet he walks in every morning and thinks he's the shit.

I love the guy (as in we are friends), but I'm not giving him the keys to the Kingdom just yet. He's an asset, he just seems to value himself in the company more than I, or my Manager do.
 

Shonuff

Mr. Poopybutthole
5,538
791
Jeez, Q1 sales are up 80% from last year. We are at max capacity in our slowest quarter. We also broke even in Q1, something we only did once before (and that was from emergency jobs). Advertising is at a whopping 25% of sales, and needs to be adjusted downwards as we start moving to our peak times. We are having a party this weekend celebrating the fact that no one got laid off this past Winter.
 

Shonuff

Mr. Poopybutthole
5,538
791
It's nice, but I've got to reign in expenses now. When I did my planning last year, it was to make it so we didn't make money, or lose money in Q1. Typically, Q1 is a huge loss, but Q2, 3 and most of 4 are profitable. If you don't watch it, it might take you until July to turn a profit for the year. I'm pumped because we made it to break even by the end of March this year, it's all gravy from here. My huge ad budget was going to guarantee us leads, as well as special Winter discounts.

To a certain degree, I went out and "bought" business in Q1, and I'm slowing that down now. With TV planning taking three weeks to change, I'm going to start pumping the breaks now. Last year at this time, I spent 3k a month on TV, I'm spending 12k now. By the time June rolls around, we should be sitting here with hundreds of qualified leads again, just like last year. When we were like that, I was spending $4.5k a month on TV.