Business Plans for Meat Goats - PDF

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					                           Chapter 1
                So You Want to be a Goat Rancher
                                                       James “JJ” Jones

Industry Overview
    The meat goat industry is an expanding U.S.
business. Estimates indicate that approximately 48.4                                                              4
million pounds of goat meat are consumed each
                                                                                                               3 1
year. Imports from other countries total 24.5 million                                             7 8           6
pounds.                                                         9
    The increasing popularity of goats is due to sev-
eral factors. The biggest factor is increased demand.                                                 5
A large number of ethnic groups whose members
prefer goat meat have settled in the U.S. Outside of                                   2
the U.S., goat meat is the meat protein highest in de-
                                                                                                             10
mand. Another factor is the attraction to agricultural
producers as a sustainable enterprise. Goats can be
a profitable enterprise for those producers with lim-               1. New Jersey 37%         6. Delaware/Maryland 4.5%
ited resources, time, and capital.                                  2. Texas 6.7%             7. Illinois 4.5%
    In 2006, the USDA estimated the number of meat                  3. Pennsylvania 6.6%      8. Indiana 4%
goats in the U.S. to be around 2.287 million head.                  4. New York 5.9%          9. California 3.9%
Figure 1-1 shows the location and distribution of                   5. Tennessee 5.2%         10. Florida 2.7%
meat goats in the U.S. Texas has the most meat goats
with 1.08 million head. Oklahoma ranks fifth with                   Figure 1-2. U.S. inspected meat goat slaughter
74,000 head.                                                        numbers for 2005.
    Although a majority of the goats are raised in the              trates the top ten goat slaughter states’ percentage of
southern part of the U.S., almost 50 percent of goats               goats slaughtered in federally inspected plants. The
are slaughtered on the east coast. Figure 1-2 illus-                difference between production location and slaugh-
                                                                    ter plants is partially due to the large demand for
                                                                    goat meat in the northeastern U.S.

                                                                    So You Want to Raise Goats
                                                                         A producer who wants to start a meat goat en-
                                                                    terprise needs to answer a few questions before the
    4                              7           6                    first goat is purchased.
                                           2                8            The first question producers need to answer is
                               5
                                                   3                why they want to raise meat goats. There are several
                           1                                        different reasons for raising goats. Each reason has
                                                                    a different set of goals for producers to achieve and
                                                        9           different methods of achieving those goals.

    > 1,000,000                        10,000 to 49,999             Brush Control Operation

    1,000,000 to 100,000               < 10,000                         One reason to raise goats is for brush control;
                                                                    to clean up woody areas. Producers who use goats
    50,000 to 99,999                                                for brush control are generally not concerned about
                                                                    overall goat production. They are only interested
Figure 1-1. Meat goat inventory numbers for                         in the effectiveness of the goats in controlling or re-
2006.                                                               moving brushy plant material. Making a profit on
                                                                1
the goats is a secondary concern. These producers
do not need to buy expensive full-blood does and
bucks; they would probably be satisfied with a com-
mon crossbred goat. They might even want to con-
sider purchasing weaned wether kids (castrated
male goats) instead of breeding stock.
    Also, the stocking rate per acre (discussed in
Chapter 10) is considerably higher for brush con-
trol than for a meat goat enterprise. Therefore, the
number of goats required per acre is higher. Another
concern for a brush control enterprise is the fencing
needed around the brushy area. The type of fencing             Figure 1-3. Adult Boer goat.
required to hold a goat is discussed in Chapter 3.
                                                               tain registration papers for the goats. The process of
Multi-species Grazing Operation                                marketing these types of goats is also more difficult.
                                                               Producers just starting in the goat business do not
     Another goat enterprise is a multi-species graz-          typically sell the high-dollar pure-bred or show goat
ing operation. This producer would start a goat                in their first or second years. Usually, it takes several
operation to compliment other animal enterprises,              years to build up a reputation and a breeding pro-
normally cattle. When goats are grazed simultane-              gram where quality warrants a high price.
ously with cattle, a higher percentage of the pasture
production is utilized. Goats typically eat weeds              Commercial Meat Goat Operation
and forbs that cows will not eat, which leaves the
grass for the cows. Possible goals for this producer               The fourth type is simply a commercial meat
are that both the cattle and goat enterprises would            goat operation. In this type of operation, the goal
be profitable. Typically, these producers would con-           should be to produce the optimal number of goats
centrate on the production side of the meat goat               to maximize profits. Although this sounds simple,
enterprise. Again, this producer would not have to             the optimal number of goats will depend on the re-
purchase expensive full-blood does, but could start            sources available.
out with a set of commercial crossbred does and a                  To determine which enterprise is best for an in-
full-blood buck.                                               dividual producer, the critical factors are the pro-
     Unlike the brush control operation, these pro-            ducer’s needs, objectives, and resources. Once the
ducers would face the challenge of where to sell               producer’s resources are determined and matched
their weaned kids. Determining a market outlet is a            with the production goals, a long-term business
critical component of any agricultural enterprise. If          plan can be developed.
no markets exist to sell the product that is produced,
then production cannot be profitable. Marketing is             Business Plan
discussed in greater detail in Chapter 12. Fencing,
discussed in Chapter 3, is also very important for a                Determining the type of operation is just the first
grazing operation.                                             step of completing a business plan. A business plan
                                                               is like a road map. Producers start with what they
Pure-bred Meat/Show Goat Operation                             know about where they are now and then determine
                                                               where they want to be in the future. Identifying the
    A third type of operation is raising purebred              best route to get from present to future is one of the
meat goats and/or show goats, such as the Boer goat            main purposes of the business plan. The plan can
shown in Figure 1-3. Although this type of operation           also help to measure the progress between the two
seems to be the most profitable due to the higher              points. It lets producers identify their operation’s
prices received for such animals, it is also the type of       mission, goals, key planning assumptions, opera-
operation that has the highest start-up costs and the          tional organization, marketing strategy, and finan-
highest percentage of failure.                                 cial planning. A business plan helps producers de-
    These producers are typically required to pur-             termine if an operation can be feasible.
chase higher priced full-blood does and bucks for                   A business plan consists of a mission statement,
this type of operation. This producer is also usu-             goals, key planning assumptions, organizational
ally required to join breed associations and main-             management, and marketing and financial plans.

                                                           2
Mission Statement and Goals                                  Financial Plan

    Developing a mission statement and setting                   Once the production and marketing systems
goals help identify why the operation exists and             have been determined, a financial plan can be de-
what it hopes to achieve. The mission statement              veloped. Producers can develop a financial plan
should reflect the producer’s values and describe            on their own or with the help of programs such
what the operation will be and what it will accom-           as Intensive Financial Management and Planning
plish. By developing a mission statement, produc-            Support (IFMAPS). IFMAPS helps producers mea-
ers have a basis for developing long-term plans and          sure resources and develop viable long-range busi-
objectives.                                                  ness plans. This service is available free of charge
    Goals can be tangible and intangible, short term         through the OSU Cooperative Extension Service.
or long term, and/or monetary and nonmonetary.               See Chapter 15, for more information on IFMAPS.
Goal setting should involve everyone in the op-                  A financial plan helps producers work out a
eration. It can be used to anticipate problems and           plan on paper and evaluate possible outcomes. If a
plan strategies to overcome them. Goals need to              plan will not work with the available resources on
be SMART: Specific, Measurable, Action-oriented,             paper, then it will more than likely not work in ac-
Reasonable, and established in a Time frame.                 tual practice. A financial plan can also help identify
                                                             possible strong and weak points in an operation. A
Key Planning Assumptions                                     good sound financial plan is an important step in
                                                             developing a profitable goat operation.
    Before getting started on a goat operation, the              A financial plan uses producers’ current bal-
type, quantity, and quality of resources available for       ance sheets, cash flows, and income statements
that operation must be determined. Resources such            along with enterprise budgets to generate project-
as available land, capital, management capabilities,         ed balance sheets, cash flows, and income state-
fencing, and marketing channels all need to be eval-         ments. A good record keeping system is needed
uated. Once the resources are determined, then pro-          to generate these financial statements. Record
ducers can match them up with a production and               keeping and financial statements are discussed in
marketing system and develop a business plan.                Chapter 15.

Organizational Management                                    Budget
   A producer can operate five types of operations:              As a part of the business plan, producers need
   1. A sole proprietorship.                                 to develop a enterprise budget for the operation.
   2. A general partnership.                                 Although no two producers will use the same bud-
   3. A Limited Liability Corporation (LLC).                 get, the sample budget, shown in Table 1-1, for a 30-
   4. A C-Corporation.                                       doe goat herd can be used as the starting point.
   5. An S-Corporation.                                          The sample budget only takes into account the
                                                             cash operating costs associated with goat enterpris-
    The majority of operations will be sole pro-             es. The return to land, labor, and capital may or may
prietorships or general partnerships. An LLC, C-             not cover the capital expenses (depreciation, taxes,
Corporation, and S-Corporation have their own ad-            insurance, and land costs) associated with a goat op-
vantages and disadvantages. Producers interested             eration. Since each operator has different capital ex-
in these type of operations need to consult with a           penses, producers should estimate these expenses.
professional.                                                    This sample budget shows a positive return to
                                                             labor, land, and capital of $953 for a 30-doe herd.
Marketing Plan                                               Although a positive return of $31.77 per doe will not
                                                             nominate this goat herd for business of the year, it
    A marketing plan is a detailed program to pro-           does show that a potential return above operating
mote and sell a product. Producers must identify the         costs could be made by a meat goat operation. Of
product and determine the best time and place to             course, this budget is just an example. Management
market that product. Marketing plans are discussed           practices and cost controlling methods that im-
in greater detail in Chapter 12.                             prove the bottom line are discussed throughout this
                                                             manual.

                                                         3
Table 1-1. Meat goat budget for 30 does, 1 buck, 170% kidding, 10% death loss.

Income	                            Description	                          	                 Total	     Per	Doe

Market Kids                        23 wethers @ 70 lbs @ $1.10/lbs                         1,771        59.03
                                   17 does @ 70 lbs @ $1.10/lbs                            1,309        43.63
Cull Does                          4 @ 125 lbs @ 0.55/lbs                                    275         9.17
Cull Replacement Does              3 @ 90 lbs @ 0.90/lbs                                     243         8.10

                                                                       Total	Income      $3,598       $119.93
Operating	Expenses

Pasture                            10 acres @ $15/acre                                      150          5.00
Hay                                8.16 tons @ $70/ton                                      571         19.04
Supplement
    Mature Does                                                                             675         22.50
    Buck                                                                                     30          1.00
    Replacement Does                                                                        240          8.00
    Salt and Mineral               $2.14 per head                                            64          2.14
    Guard Animals                  14.6 bags @ 50 lbs bag/dog/year @ $14/bag                204          6.80
Vet (Health and Deworming)         $5.05 per head                                           151          5.05
Marketing                          $6.52 per head                                           196          6.52
Fuel and Repairs                   $8.17 per head                                           245          8.17
Annual Operating Capital                                                                    118          3.93

                                                           Total	Operating	Expenses      $2,645        $88.16

                                                Return	to	Land,	Labor,	and	Capital         $953        $31.77

Fixed	Expenses

Interest                                                                                    451         15.04
Taxes and Insurance                                                                         102          3.40
Depreciation                                                                                246          8.20

                                                               Total	Fixed	Expenses        $799        $26.64

                                                          Returns	to	Labor	and	Land        $154         $5.13



Conclusion                                                     can begin the meat goat operation. This manual
                                                               will provide the basic information needed to help
    Going into the goat business is not a decision that        answer these questions and produce meat goats
should be made quickly. Much thought and plan-                 successfully.
ning needs to go into the operation before the first
goat is purchased. Answering the following ques-               References
tions is critical to the success of any goat operation:
    • Why raise goats?                                         OSU Enterprise Budget Software. http://www.age-
    • What type of goats to raise?                              con.okstate.edu/budgets/
    • What are the available resources?                        USDA, National Agricultural Statistics Service,
    • Where are the available markets?                          Statistical Highlights of U.S. Agriculture: 2005.
                                                                http://www.nass.usda.gov
   Once these questions have been answered and
a successful business plan developed, producers
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