Paying a cattle call

(FORTUNE Small Business Magazine) -- Craig Winterburn had spent the previous night calving. Every four hours, the owner of the Running W Ranch in Helena, Mont., had stomped out of his bed and into the icy March gloom to check on his cows and assist in birthing. "This is the time when you have an effect on income by saving lives," he explains in his trademark cowboy drawl.

Affecting income has always been on Winterburn's mind. When our experts visited Running W last year, they warned the rancher that he had to quickly differentiate himself in an increasingly fierce marketplace dominated by bigger outfits. Our consultants suggested he take his roughly 500-head operation organic while reducing the hefty $850,000 debt on his property.

But since that time, prices for domestic steers have climbed from $1.15 a pound to about $1.35, giving Winterburn a boost and dispelling the air of panic. "We have been working on changes," he notes, although he decided not certify his operation as an organic ranch. "It would take too much time and cost too much," he says.

Instead, Winterburn recently made the decision to partner with a natural-meat company, probably the Oakland-based Niman Ranch or Creekstone Farm in Campbellsburg, Ky. Because he doesn't use hormones or growth stimulants on his cattle, he hopes to enter a niche where he can sell his steers for a premium, perhaps as much as $50 more a head.

Winterburn has also been ramping up direct sales through word-of-mouth. Sales for his locker beef--meat bought in bulk-- have more than doubled over the past year. And he raised his prices by 75%, still cheaper than local groceries. Come summer, Winterburn plans to launch a marketing campaign. "I have two young scholars, a high school kid and a college student, to help me," he says. "They'll be my ambassadors."

Last year Winterburn's net revenue hit $244,000, a sevenfold increase from 2004. Still, challenges remain. He is trying to figure out how to sell off the development rights to a portion of his land in order to pay off his mountainous debt, now at around $700,000. In the meantime, the cattle world continues to get tougher on smaller operators. High fuel prices have increased production costs. In August a ban on Canadian cattle was lifted, which will eventually cause a drop in domestic cattle prices. And big competitors, including Purdue, are beginning to enter the natural and organic niche markets. But Winterburn is optimistic. "We're still here," he says, laughing. "It's not ever easy. But we're getting through."