Planning for Profitability
There are a lot of things that we worry about, that we really have no control over. Those fall into the Circle of Concern. As a successful business manager, we need to focus our time and effort on the things that we have influence on—the Circle of Influence. The amount of management that we implement in our orchards should be directly related to the production that we are expecting and not exceed the revenue that we will receive from the crop. If we are continually breakeven or loss money, we will be out of business eventually. Having a profitable business, we must evaluate where we are spending our money and determine if the management practices we are following are actually creating a profit for our business. If not, we must change our practices. (Chart by Charles Rohla)
The first key to profitability is understanding where you spend money and knowing how much each activity or practice you do in the orchard costs. After learning how much it costs to implement the different practices used within the operation, we can intentionally evaluate the actual benefits of these other practices on the profitability of our operation. For example, what is the true benefit of mowing if we plan to mow? Are there negative consequences that will arise if we mow? We must ask ourselves if the benefits outweigh the consequences (for instance, one consequence is the cost of the mowing).
Have you ever developed an actual budget for your pecan operation? Do you plan your management before the start of the growing season? Have you ever calculated the exact cost for each activity that you do in the orchard? When you think about having to spray for insects or diseases, do you think about the actual cost of that application (labor, equipment cost, fuel, killing non-target pests, etc.)? If you answer no to any of these questions, I guarantee you are leaving money on the table that could help increase your profitability.
I have interacted with many growers for the past 20 years and continuously hear the same topics discussed. As growers, we are always talking about pecan prices, weather (usually the lack of rainfall), insect and disease pressure, prices of everything we need to grow pecans, and so on. Now, think about what we have control over to help us make more profit. We have control over very few things, like the amount of input we use, keeping the crop on the trees, and the cost of our overheads (equipment, repairs, etc.). Most of us only have control over the pricing if we are marketing directly to a consumer; either way, we depend on the buyer’s willingness to purchase our pecans. Therefore, we need to focus our management on what we control and manage for what we want (increased profits). We call this the “Circle of Concern and Circle of Influence.” We have control over things within the circle of influence but little to no control over things within the circle of concern.
Things you do have control over—The number of times we make trips through the orchard with the mower and sprayers. We have control over the number of times we spray (only spray when we have to, not on a calendar date), the amount of irrigation we use, whether or not we use herbicide in the orchard to control weeds (keeping the ground cover looking like a lawn), and harvesting if there is little to no pecans to pick up (harvest cost greater than production potential).
Believe it or not, we do have control over the need to spray insects. Just because our neighbors are spraying or we’ve been taught there is a right time to spray insects or diseases does not mean we must. We must determine if a spray is justified and economical to apply. Understanding why we have an insect or disease problem should be something we are considering, not just the fact that we always have to spray. Suppose we are dealing with a scab problem. Is it because the trees are susceptible or because our management encourages scab pressure (lack of airflow, high humidity in the orchard from standing water, etc.)? If we are having problems with insects, have we created the problem by spraying for something else that has killed all the beneficials that would have helped control the now target insect? Or are there other means to control the target insect without using chemicals that would be more cost-efficient over the long term?
The key to profitability is planning for a profit and having a plan of action when management decisions need to be made. Knowing the cost benefits of each practice we implement in our operation will help us determine if an action is necessary or justified. We must be intentional about our management decisions and ensure that each decision is profitable.
