Overview
Understanding the Total Cost of doing any type of business has become very popular during the last 5 to 10 years as companies have had to rethink how they do work in this competitive world. Many departments had moved to personal computers thinking it was much cheaper than using the larger computers only to find the hardware and software costs were only ¼ to 1/5 of the total cost. This article will discuss how you can evaluate the total cost of raising goats. This can be done to see what your real profit is and how you may increase your profits. It can also show you how to understand how much real money you are losing and how to minimize the amount or move into a profitable business.
This is a methodology not facts about the average costs of raising goats. What this article will not show:
How much it generally costs to raise goats
Identify if it is more profitable to raise goats vs. cattle or some other animal
Methodology
The methodology for identifying the total cost of doing any business is the same. The major steps are:
Identify the major categories of costs incurred in the business
Identify the cost types within each category
Collect or estimate the costs for each cost type within each category
Develop a statistical graph of the total costs for identifying the larger cost areas
Define which cost areas you have a better opportunity for reduction
Develop an action plan to reduce those costs
Revisit your total cost case at a later time to evaluate changes and progress
Identify Major Costs Categories
The major cost categories for raising goats are:
Costs of animals
Costs for feed supplements
Costs for land and shelter
Costs for health
Cost for labor
Costs for transportation
Costs for administration
Costs for selling
Costs for misc.
Identify the Cost Types within Category
Costs of Animals
Cost of Does. The overall cost of the does you purchase should be identified. Lets take an example of your planning to buy a doe for $1000, expect to keep her five years and then estimate you can sell her for $400 at the end of five years. You would subtract the $400 from the $1000 leaving $600. This divided over five years would be a cost of $120 for this year. If you believed you could buy her for $1000 and sell her next year at the same price after having kidded, you would have no cost associated with the year.
Cost of Bucks. This is the same as for does with one exception. If you plan to offer stud services, this should be calculated into the cost of the buck, thus reducing the overall cost.
Cost of breeding fees. If you take your doe to have it bred with an outside buck, you must identify this cost.
Costs of Feeding ( for year)
Hay
Grain
Minerals
Vitamins
Cost for Land, shelters and protection
This assumes land already owned would have the same value later and will not be added here.
Yearly taxes on land used by goats. This is a real cost
Lease costs
Shelter costs. This cost should be evaluated similar to the animals. Look at the cost of adding shelter and estimate the value it will have later. Spread the cost over whatever period is appropriate
Cost of fertilizing and any treatments done to pasture for goats
Fencing cost. Similar to shelter. Evaluate value added to land and subtract for actual cost, then spread over appropriate period.
Cost of Guard animals. This is the cost of animal spread of appropriate years plus yearly cost for maintaining animal such as dog food, medical, etc.
Costs associated with health
Cost for vaccines
Cost for medicine such as worming, antibiotics, iodine, etc
Cost for vet
Costs for health certificates
Cost for medical supplies. This should include hoof trimers, needles, etc.
Cost for Labor
You probably do not want to calculate the cost of your time, but you may consider looking at it an consider if you could do the work more efficiently.
Cost of hired labor
Cost of Transportation
Include motels and meals where costs are associated with travel related to goat business. Use a cost per mile for estimates. (e.g. .27 per mile without trailer, .50 per mile with trailer)
Travel to sales
Travel to shows
Travel to feed stores
Travel to other farms
Travel to symposiums
Trailers and goat haulers. This should be spread over appropriate years.
Cost for Administration
Association fees
Registration fees
Subscriptions to magazines and newspapers
Software for goat business. Spread this out over an appropriate period
Stamps and envelops
Costs for Selling
Auction fees
Advertisements
Signs
Business cards
Cost for Misc.
Feed buckets. Spread cost
Hay racks. Spread cost
Tattoo equipment. Spread cost
Show supplies
Etc.
Collect or Estimate Costs per Category
You could set up to collect this information over a year period but estimating for the first year is a better way to start. Estimate first and then collect to validate the accuracy of it. Put the estimates into a spreadsheet and create subtotals for each category.
Develop Statistical Graphic
Take the spreadsheet and create a pie chart to show how the different category costs compare.
Define Which Categories are Better for Cost Reduction
Look at the largest cost categories and consider how much control you have over it. For example, you have very little control over land taxes. However, cost of feeding may be something to consider alternatives.
Develop Action Plan
Develop a plan for reducing costs of the identified category areas. Make sure you have set a goal for the reduction. If you do not have a goal to shoot for, you will have difficulty in seeing if you are progressing or not.
Revisit Total Cost Case
Next year at the same time revisit your cost estimates and the actual costs collected. This starts the process all over again to determine if there are areas for reducing costs.
