Risk Analysis And Partial Budget Template (With Example)


An Effective Combination
Partial Budgeting and Sensitivity Analysis
Bridger Feuz
University of Wyoming
Many decisions and strategies present themselves
Figure 1 is blank partial budgeting template.
to ranchers each year. A few examples might be:
Figure 2 is an example of a partial budget using
Should I sell calves or yearlings? Should I retain
yearling steer strategy. In order to better
ownership on my heifers? What should I do with
understand the process we will look at each of the
my cull cows? Should I buy hay or put up my
four essential questions. Keep in mind that some
own? Each of these decisions can affect the
items may fit under more than one question. The
overall ranch budget and profitability picture,
key is to account for all of the essential elements
which can sometimes be difficult to quantify.
of the decision in at least one of the four
However, the essential question is “Will I be
categories, making sure not to double count any
better or worse off for implementing a decision?”.
one element.
A relatively simple an effective approach for
answering this question is utilizing the
1. What new or additional costs will be
combination of a partial budget and sensitivity
Include all direct costs associated with the
Whether it is on the back of a napkin or on the
proposed change. Examples would include; feed,
barn wall, business men and ranchers alike have
fuel, transportation, maintenance and repairs,
for ages put a “pencil” to many management
veterinary fees, interest, death loss, etc. Labor
scenarios. Partial budgeting is a simple tool that
may or may not be an additional cost that would
helps to put a framework around those
be incurred. If the proposed change would require
calculations and improve the accuracy of one’s
additional labor to be hired than it would be an
findings. A partial budget only looks at the costs
additional cost. However, if like many ranches
and returns that will change with the proposed
the work force would just shift, or increase, their
scenario and results in an estimate of the positive
efforts than it would not be appropriate to add in
or negative dollar value impact. Partial budgeting
labor as a cost.
accomplishes this by asking four essential
questions in a systematic way. The four questions
2. What current income will be lost or
are: 1. What new or additional costs will be
incurred? 2. What current income will be lost or
reduced? 3. What new or additional income will
This section accounts for the current income that
be received? 4. What current costs will be
we are receiving before the proposed change.
reduced or eliminated?
This is often the receipts from the sale of livestock
or crops. Since we are often delaying our income


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