“A Confession to Make…” How to Recognize Dairy Debt Problems Early

Recently, I was talking with a Client who suddenly confessed that, at his age, he shouldn’t have as much dairy debt on his operation as he actually does. Wow, I thought, the light finally came on, after 15 years. How interesting…

In actuality, it has been 15 years since I suggested (very strongly, I might add) that he take a much closer look at his nutrition program. I didn’t tell him to fire his Nutritionist, although that was one option available to him. I did not say that he should source his commodities somewhere else, although that, too, was an item to consider. What I did point out was that his feed costs were regularly about $1/cwt higher than others in the industry, including my other Clients. This was not his only expense area to consider improving, but it would be a great place to start, especially considering that feed represented 50-60% of his total costs.

Business coach Dan Sullivan says, “All progress begins with telling the truth.” Think about it: If he had decreased his feed costs by $1.00/cwt (not an unreasonable feat, given that he was regularly $1.00/cwt over my other Clients), he could have saved $25,000 per month. With 180 months since we had originally talked about it, he would have probably been better off by over $4,000,000.

Now, before you e-mail me and tell me that we cannot short the cows, save your time and effort. I already know that. We never want to cut costs only for the sake of cutting them, as some producers reluctantly did in 2009, nor do we want to make cuts where cow performance is impacted. I agree with that. However, to blindly move forward and leave this money on the table is foolish! I have many other Clients who made as much or more milk as this one did, and their feed costs were considerably lower…

This is also not a slam on the Nutritionist. Overall, I believe they provide a much needed service, and many of them do a fabulous job in an area that is not always easy to master. By the way, unlike this Client, in your operation perhaps its not feed cost that is out of line. Maybe it’s supplies, labor, or other areas. Whatever it is, do yourself a favor and identify it today! Learn what your Break-Even levels are, as all of my Clients have, and then make the necessary adjustments to improve your cash flows. The take-away here is:

 

“All progress begins with telling the truth.”

Dan Sullivan, Founder of The Strategic Coach

 

We will talk more about Break-Even levels next time, but until then, what confessions do you need to make? Getting the right information needed and then moving forward with a proactive plan is what I consider Next Level Thinking! If you need assistance with this, please let me know. I welcome your thoughts and comments.

If you would like to learn more about similar topics and the tactics our Clients have used to improve their outcomes, as well as what applications of these lessons you can make in your business, please join us for our next Success Strategies Mastermind Group series of quarterly workshops in July 2019. They are designed to teach more people the Finance & Strategy Concepts that I offer business people. Signups have begun, giving you the opportunity to learn these same concepts and meet with other producers who have overcome some of the same challenges you may be facing. Check them out at:

https://success-strategies.com/mastermind-group-for-dairy-farmers/

If you need assistance, please e-mail me at john@success-strategies.com or check out our website for many useful tools for your ongoing business evaluation at www.success-strategies.com. I’m always available for a follow-up call and wish you the best of success!