Ground Cover Supplement : GC Supplement - Profit drivers
5 Issue 132 | Jan -- Feb 2018 | GRDC GROUNDCOVER SUPPLEMENT: PROFIT DRIVERS GROUNDCOVER PROFIT DRIVERS Top 20% FIGURE 4 Western region -- profit as a percentage of turnover. % SOURCE: CORPORATE AGRICULTURE AUSTRALIA Average WA Central WA Eastern WA Northern WA Sandplain & WA Mallee Western regional average 30 25 20 15 10 5 0 Variable costs Average across the dataset 43.55% 35.57% 12.57% 9.55% 6.31% 8.27% 7.78% 3.44% 8.89% 10.18% 9.44% 4.19% 11.18% 29.08% Top 20% for this benchmark FIGURE 5 Total cost as a percentage of profit for the southern region: average versus top 20%. SOURCE: RURAL DIRECTIONS PTY LTD Overheads Financing costs Depreciation Lease costs Profit Imputed labour business model is critical to servicing debt and maintaining farm performance. PEOPLE AND MANAGEMENT Good management is a key profit driver and is required to optimise gross margins and develop a low-cost business model. It is an implementation gap, rather than a knowledge gap, that drives the substantial difference in performance between the top 20 per cent and their lower-performing peers. There are six key management characteristics of high-performing grain businesses. These are: 1. having a systems focus; 2. taking a bigger picture or 'helicopter' view when under pressure; 3. internalising and taking responsibility for key decisions; 4. focusing energy on things that can be controlled; 5. superior implementation ability; and 6. strong observational skills. RISK MANAGEMENT A resilient business is one that can withstand a production shock and still perform well financially. Resilient businesses optimise gross margins and have a low-cost business model. Business resilience can also be improved through proactively managing risk. Some measures that indicate well-implemented risk management within a business include: n lower income variation from year to year; n lower long-term costs of production by commodity; n lower variability in profit from year to year; and n greater ability to withstand a business or production shock. Businesses that have effectively identified and mitigated key production and business risks generally have less income variation from year to year and much lower long-term costs of production for all commodities they produce. o GRDC Research Code RDP00013 More information: James Hillcoat, Rural Directions Pty Ltd, 0438 801 966, jhillcoat@ ruraldirections.com; Jason Lynch, Macquarie Franklin, 03 6427 5300, jlynch@macfrank. com.au; Paul Blackshaw, Meridian Agriculture, 0427 546 643, firstname.lastname@example.org. au; Simon Fritsch, Agripath Pty Ltd, 0428 638 501, email@example.com; Gordon Verrall, Corporate Agriculture Australia, 0428 721 178, firstname.lastname@example.org Select enterprises that suit best land use and highest return in a region.
GC Supplement - More profit from crop nutrition 17
GC Supplement - Crop sequencing