Risk Analysis And Partial Budget Template (With Example) printable pdf download

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

incurred?

analysis.

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

reduced?

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

Risk Analysis And Partial Budget Template (With Example)

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