Are You Playing All Four Quarters?

I recently had an excellent discussion with one of my Clients about how the last 12 months had turned out. As many of you know, early 2020 presented an incredibly challenging time with the onset of COVID-19 and its extremely low milk prices, particularly during the second quarter.

However, he had maintained his production levels, despite the fear in the markets, and it had paid off. He was solid on his Cash Flows and the details of his herd management, but then at end of his year, he seemed to “take his foot off the gas…” Maintenance of his facilities seemed to fall short of their normal levels, and milk quality started to suffer.

When I asked what had happened, he seemed a little defensive. However, helping people stay on their “A Game” is part of what Clients pay me for. Then, he informed me with the following: “John, I’m tired. My employees are exhausted. These last 12 months have been very taxing.”

Believe me when I say that I did, indeed, understand. I had overcome several serious Client challenges on the banking front, facing off against some of the most ridiculous financing challenges I have seen in 23 years of consulting. However, I worked with my Team and my Clients to overcome those hurdles.

You know what made the difference? We “played all four quarters!” Every game is won or lost in the fourth quarter. You can plan an excellent game for three quarters and then lose it in the fourth quarter. Guess what? It is no different in the dairy business. You must play all four quarters each & every year. Defeat and its willingness to take you down is on call all the time, just waiting for you to let up the slightest little bit!

I want to encourage you to “fight the good fight,” and I mean all year long. Here are some suggestions for “winning the game” by playing all four quarters:

  1. Complete regular monthly Cash Flow Analysis, not just occasionally, but each & every month. My Clients see this information from me every month. There is no better way to stay ahead of the game. While I am an advocate of regular quarterly CPA prepared Financial Statements, a lot can happen in 91 days. I want to catch any expense items that are getting out of control before they get “beyond repair.”
  2. Regular Management Team Meetings – These should be held with your Financial Advisor, Nutritionist and Key Employees on a regularly scheduled basis. As I said earlier, you have to play all four quarters to “win the game.” However, you also have to have a winning team, all of whom are pulling in the same direction. If they are out of sync with you or each other, this can create real challenges to your overall success.
  3. Regular Finance Team Meetings – These can be crucial to making sure that your Team stays on track. Measuring your Cash Flow monthly is one thing, but making sure that your Team is aware of challenges that arise is crucial. How can we expect them to keep costs in alignment if we never share our concerns with them?
  4. DMC & DRP – These programs are, simply stated, a “form of insurance.” Like any insurance program, they provide you with a safety net against any severe downturn, in this case a falling milk price, which, of course, can wreck your Cash Flow. Think of these safety nets as an investment, not a cost. Just as you would not call your insurance agent at the end of a year & and complain about the premiums you had paid, although your house didn’t burn down, you likewise shouldn’t complain about these premiums. Both DMC & DRP are a form of financial insurance.

I hope you’ll consider playing all four quarters this year, even the frustrating ones, because that is the only way for you to WIN!

If you would like to learn more about these concepts, just shoot me an email (john@success-strategies.com) stating “NLT Workshops,” and I will be sure to include you in future invitations.

What’s Up with this Measurement Acronym?

In previous articles I have often stated that if you measure something, you can understand it. If you understand it, you can control it, and of course, if you have the ability to control something, you can then improve it!

Please take a moment and consider the possibilities of this acronym – MUCI… Its benefits are unlimited. Just think about any item that you measure in your business. Again, if you take time to measure it, you undoubtedly will better understand that item. If you understand it, you will be more empowered to gain control over it, i.e., adjust it to your advantage. Finally, once you fully understand this item and gain some control over it, you will have the ability to improve it. That is where the fun and excitement begin!

We recently ran a summary of our Dairy Clients and their results for the last four years. We have been measuring Cash Flows on some of them for over 15 years now, but we simply looked at the last four years on each of them to obtain a comparative set of results. Now, these operations are quite variable in terms of revenue, but the most noteworthy observations include the following:

  1. Every one of them has experienced upward pressure on many of their expenses, particularly Labor, Supplies and Repairs & Maintenance Costs.
  2. However, all of them have boosted their bottom-line results, some by as much as $3.00 to $4.00/cwt of milk. Part of this is a direct result of improved cost controls, and in several cases, it was due to actually putting some items out for competitive bids… Imagine that!
  3. With a couple Clients, we were able to “discover” additional sources of Revenue they had overlooked previously. In one case, this, combined with a decrease in their interest expense, boosted their bottom line by over $3.00/cwt, vastly improving their Break-Even levels!

Ultimately, to answer the question in the title above, this is “What’s Up.” This same resource is available to you in your business, regardless of your industry. My Business Coach Dan Sullivan states that: “Our eyes only see what we are looking for…,” and that’s what makes this process so valuable. It can definitely boost your profitability and better equip you to use tools such as the Dairy Revenue Protection program, using your actual numbers rather than just plugging in industry averages.

If you would like to learn more about this tool and take full advantage of this process, just shoot me an email stating “NLT Workshops,” and I will be sure to include you in future invitations, as outlined below. Want to learn more? I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. Let’s take your business to the Next Level!

Can You Really Claim to be an Entrepreneur?

Jean-Baptiste Say was a French Economist who lived from 1767-1832. He was best known for his Theory of Markets and their relationship to entrepreneurs. His Law of Markets holds that supply creates its own demand. For example, before the cell phone was created, did we know that we needed one? Not likely. However, once the i-phone or Android versions were created, our demand for them has grown immensely.

He goes on to expand his theory by generating three primary questions, as outlined by my own Business Coach Dan Sullivan, Founder of The Strategic Coach:

  1. “As an individual entrepreneur, what are your personal resources that can quickly be taken to a higher level of productivity?”
    1. In essence, are you using your expertise/skill set to your maximum advantage? Are you spending 100% of your time “in the business” doing daily activities, or are you investing part of your time “on the business” planning your future course, as well as tracking your YTD progress both financially & in terms of business efficiencies?
    1. The interesting thing is that, regardless of your business size, the most optimal approach can yield large dividends, whether your revenues are $4 million or $20 million annually. I’ll have more on this in my next blog.
  2. “As an entrepreneurial company, what are your organizational resources that can quickly be taken to a higher level of productivity?”
    1. Are your people being maximized? Is automation a possibility for your operation? I had a Client whose fruit packing facility was able to go from 10 to 4 employees with only partial automation. I also had a dairy Client whose milk barn automation, using robotics, allowed them to go from six milkers down to just two plus a part time relief person.
    1. The paybacks on these changes were huge, while also relieving the owners of considerable management time & effort.
  3. “What are your… resources that can be quickly taken to a higher level of productivity?”
    1. Can your land & buildings be used differently? Do you even have some that are currently idle?
    1. With some simple changes, can we generate higher levels of productivity?

Take some time this week to think through some of these potential changes in your business. While some of them can be scary, the results you can achieve are often just what your business may need to get to the “Next Level!”

Are You Focused on Winning?

Do you ever wonder when your next “Win” will be coming your way? I know I often asked that question earlier in my career. It has been said that we normally find what we are looking for in life, so allow me to provide you with a better approach.

Several years ago, my Business Coach Dan Sullivan of the Strategic Coach organization offered an excellent idea for everyday use. It’s called the WinStreak®, and it’s available as a free app that you can download on your phone.

It provides a simple, but powerful, way to accumulate more “wins” in your business and life. At the end of each day, you list your three greatest accomplishments for the day. It will also ask you to list the three largest objectives you intend to accomplish tomorrow.

The payoff is that instead of dwelling on the tasks you didn’t do or the items that you didn’t complete, it helps you to focus on what you have done, as well as what plan to focus on tomorrow. I’ve been doing this for at least three years, and it has helped me focus on what really matters.

We all are inundated with negative information every day. I have found that this App helps you to focus on “Wins.” Former Notre Dame football coach Lou Holtz explains that the WIN is really an acronym that stands for “What’s Important Now.” Rather than being barraged with negatives, this tool helps you to focus on the positives.

One process that I add to the use of this WinStreak® App is to answer three questions for myself:

  • Did I accomplish my objectives? If not, should this become one of my three goals for tomorrow?
  • Did I do my best? Motivational Speaker Les Brown stated that, “All you can do is all you can do, and all you can do is enough!”
  • How can I make tomorrow even better? This clearly fits with the “Tomorrow” section of the WinStreak® App.

In a world where we are constantly hit with negative items, I hope you find this article helpful in your business. As Lou Holtz suggested, let’s maintain our focus on “What’s Important Now!”Want to learn more? I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing portions of this process through Zoom Group Sessions, with monthly follow-up calls on an individual basis.

Let’s take your business to the Next Level!

Have You Ever Considered Firing Yourself?

I recall a fantastic book by author Harvey Mackay entitled We Got Fired! – And It’s the Best Thing That Ever Happened to Us back in 2004. While his book focused on celebrities like Baseball Manager Joe Torre, Governor Jesse Ventura, TV Host Larry King and former Notre Dame Football Coach Lou Holtz, I believe there are some applicable lessons for each of us in our businesses.

Each of these individuals had been fired at some point in their careers, but they also were able to “bounce back” and take their leadership roles to new levels. While I’m fairly certain that none of them had immediate financial concerns, I think it’s important that we zero in on what else they had in common with us, in the event that the same thing happened to us.

They all claimed that this event was the best thing that ever happened to them. While they had regrets about losing their jobs and the paychecks that went with them, they also realized that it was not the end of the world if they used this as a learning experience. They focused on three questions:

  • Where did I go wrong?
  • Was I actually “off track?”
  • How can I do better, moving forward?

Now, let’s take this concept one step further. Can you apply these lessons before you got fired?

Let’s pretend you are getting fired from your current role. Kind of a scary thought, isn’t it? Regardless of whether you are operating a dairy, a vineyard, a service business or a bank, what “justification” could your “Board of Directors” find to justify letting you go? What are the areas where you could do better?

Yes, I know it’s “tough out there,” and we all have a million excuses for why our business wasn’t more profitable, but as the saying goes, “When the going gets tough, the tough get going!”

What areas do you need to improve in your business? Is it management of your labor force to boost efficiencies? Remember that employees need some development programs, too. Are you working with them to educate them & boost their efficiency levels? Recall my prior conversation with a bank manager who claimed there was nothing worse than spending money on training people and having them leave for other jobs. I’d assured him there was one worse outcome – that was not training them & having them stay!

Do you need to improve on cost controls? If you measure it, you can understand it. If you understand it, you can control it. If you can control it, you can improve it. This is true for Cash Flow and Cost Controls, too. However, if you look back several lines, you’ll note that the key was to measure it. I’ve been doing that with Clients for 22+ years, and it pays huge dividends!

What about development of your company’s future direction? Many factors are changing, so are you staying on top of these changes? Does additional automation have a place in your operation?

The ultimate key is to turn over as many stones as necessary to make sure you understand the following points. Why do we do a task this way? Is it because it’s the most efficient approach, or is it because we’ve always done it this way? Should we change?

I recommend that you undertake this “thinking process” without the pain of actually experiencing being fired. Take a moment and ask yourself, “If I was being fired, what specific reasons could they use against me?” If you are willing to complete this task, you will have identified the areas upon which you should focus your “improvement programs.” Better yet, you will be headed to higher levels of success, without the pain.

Want to learn more? I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing portions of this process through Zoom Group Sessions, with monthly follow-up calls on an individual basis. Watch our website for more details.

Could This Be the Answer for You?

I’m sure you are familiar with the S-Curve concept that describes the development of a product, or for that matter, just about anything. You know – first the product is introduced, it develops slowly, and then suddenly (if it has merit) it takes off in an upward trajectory until it is eventually replaced with a better product & it fades into obscurity.

I recently read an article in Inc. magazine by Magnus Penker, CEO of Innovation 360, within which he explains that the key to success in business is to consistently leave the S-Curve that you are on for a newer, better one, prior to your current one entering that “flat stage” at the end of its life. In other words, he suggests that we must “Innovate or Die.”

While that concept may sound scary, especially if you haven’t done much innovating recently, I think it’s more important that we remember that the rules of business have changed. We are under much more pressure to boost efficiencies, reduce costs or simply streamline our processes. The key, as Penker points out, is to prolong your current S-Curve as long as it continues to be beneficial, but not beyond that point.

Think about anyone in your industry who has recently gone out of business. Did they innovate or simply do the same things in the same manner because, “We’ve always done it that way?” On the contrary, Penker states: “To prolong the life of your S-Curve, you’ll need to employ incremental innovation, which is all about improving current products or services, enhancing their features, or lowering operating costs.”

He goes on to say, however, that the challenge of generating these incremental improvements may leave you vulnerable to sudden, unexpected shifts in your market. The key is to experiment with new ideas that you can learn from, without severely damaging your future. Of course, this also needs to be offset with the ever-rising need for change.

Finally, he asks: “How will you change the world?”

Once again, using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you remains:

“What innovations do you have available to you right now to boost the productivity of your business (… and transition you to the next S-Curve)?”

If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!

I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing portions of this process through Zoom Group Sessions, with monthly follow-up calls on an individual basis. Let’s take your business to the Next Level!

If I Ran the Circus, Guess What?

I thought it might be appropriate to offer the following summary of how I would make everything work if, as Dr. Seuss stated, “I Ran the Circus!”

Regardless of your industry, I’d pull for the following outcomes:

  1. Our profit margins would always be huge. In fact, in light of our current “fairness doctrine,” where “everyone gets a trophy,” I’d make sure that every business in our country was profitable.
  2. We’d have no labor challenges because all of our employees would be highly motivated, simply happy to have a job, and anxious to get to work each day.
  3. We’d have no operational challenges, because we would have already anticipated all of the potential hurdles we could face as a business, and, Voila, there would already be items in place to protect all operations from such calamities.

Am I being somewhat sarcastic? Yes, of course, but let’s take this a step further and start thinking about it further, since I have no control over the occurrence of these challenges.

First, let’s look at these challenges directly. What is the largest challenge you face in your business currently? Are there potential solutions to this? What needs to occur to make progress on this problem? Who can assist you in overcoming this challenge? Trust me when I say that if you can answer these questions directly, you’ll be 75% of the way toward your solution.

How about an example? If labor turnover is your biggest issue, can you start a program of training employees for better outcomes? How about a low cost “development program” that helps you to have some new workers available, as needed, perhaps through your local Junior College? Are there other ideas for winning this challenge?

I remember a discussion with a bank manager once where he exclaimed that, “John, we just cannot afford to train our employees on their job activities. There is nothing worse than training people and then having them go over to the competition.” After thinking about for it for a moment, I suggested that there was one thing worse, and that was not training them & then having them stay…

If labor cost is your biggest challenge, what about looking at potential automation? In 22 years of consulting, I cannot think of one single case where any Client automated a process and then later was disappointed to the point of taking it out. On the contrary, it led them to think about and discover even more ways that they could automate tasks. Indeed, they never looked back. They just pushed forward & made additional improvements!

As I suggested in my last blog, using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you is this:

“What innovations do you have available to you right now to boost the productivity of your business?”

If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!

I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing portions of this process through Zoom Group Sessions, with monthly follow-up calls on an individual basis.

Let’s take your business to the Next Level!

Are You a Prime Target for Creative Destruction?

Scary thought, isn’t it? Please allow me to put a more positive spin on this concept. It was introduced by Austrian-American economist Joseph Schumpeter who lived from 1883-1950. He considered entrepreneurs (Yes, that’s you, whether you are the third generation running your Family Business or you have started your own shop…) to be the lifeblood or most dynamic factor in pushing the business cycle forward through capitalism.

He developed the term “Creative Destruction,” outlining how entrepreneurs continually disrupt economic stasis, by introducing new concepts to the market place. And before you become annoyed about “continual change,” consider that, without it, you wouldn’t be able to read this Next Level Thinking™ blog post, unless, of course, the one person I had mailed it to decided to share it with another person, and so on…

So, let’s take a look at what “Creative Destruction” looks like in real life. During a recent Client meeting, they described a situation where an employee had developed an “attitude” and had decided that, not only did he know more than the Foreman and the Owner of the business, he would be absolutely defiant about the process, to the point that he was recorded on video stating that “he would only do it his way…” Initially, I thought this looked like a prime “cost cutting opportunity.”

However, after thinking about it for a while, I realized that was simply “Downstream Thinking,” i.e., putting out fires after they had been started. So, at the risk of sounding like a “ruthless capitalist,” I realized that it was an opportunity to combine the “Creative Destruction” concept with “Upstream” thinking that Author Dan Heath describes in his book of the same title.

Now, this is what I really get excited about. The Client’s Labor Cost was about 30% above where I wanted it to be. Thus, I asked the question, “How can I take control of this process and change it, so that I am not chasing the problem? What steps can I take to change this?”

The annual cost of the labor associated with this segment of my Client’s business was about $171,000. If we added in the expense associated with Workers’ Comp, Benefits, Overtime, and Corporate Taxes that were being paid, the annual tally was around $225,000. That’s the bad news…

The good news is that this entire segment could be “automated” for about $2.1 million. However, this capital investment would easily be repaid in 9-10 years without changing the rest of their operation. Oh, but there is more good news. This change would allow them to increase the through-put of their business by at least 20%, reducing the payback period to about eight years.

There is no telling how much it might boost employee morale & productivity among the remaining employees, but it would certainly be beneficial to eliminate the Labor Cost, Workers’ Comp, Benefits & Corporate Taxes being expended in this part of this Client’s operation.

Using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you is this:

“What innovations do you have available to you right now to boost the productivity of your business?”

If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!

I urge you to please join me in making the changes we need to in order to succeed and prosper! As I move forward with my Next Level Thinking™ blogs, I’ll continue to focus on the benefits of this type of thinking, and if I can assist you in any way on this process, please reach out at john@success-strategies.com or at 209-988-8960.

When Will You Go Upstream?

So often, we get caught up in the throes of responding to various crises in our business. You know, feeling like you are always “on call,” just waiting to put out the next fire… We basically are, as Author Dan Heath suggests, “…downstream, handling one problem after another, but we never make our way upstream to fix the systems that caused the problem.” So, why do we act in this manner?

I have two suggestions. First, you do not have to act in this very manner. Second, I’ve worked with my Clients to avoid this problem. I’ve taught them to respond, when needed, but, more significantly, start exploring (as Dan Heath describes it) “Upstream,” in effect where the problem started.

Let me provide you with a real-life example. My Client was a distributor of various fruits & vegetables. They would contract with growers, and then market these items after they were “re-packed” into their containers. Historically, they were fairly profitable, but their labor costs were getting out of control… Imagine that!

Regardless of what type of business you are in, you should consider the similarities of their situation with that of your company. Whether you measure your Revenue, Expenses and Profitability on a per box or per bag basis as they did or some other measure, this same thinking is still applicable.

If we know our costs, as we did in this case, and we understand the historical levels of rejected units under normal conditions, we can predict, with some degree of certainty, our expected results & profitability. Remember, if you can measure it, you can understand it. If you can understand it, you can control it, and if you can control it, you can improve it! Looking at these early in the process is what Dan Heath calls “Pre-game measures.”

The next step Heath suggests is to “Align incentives.” With this mind, we reinvented the labor/pay structure completely to include incentives for these workers to produce positive results. Since we had already modeled their Revenue, Production & Costs, we could simultaneously incentivize the workers and boost results on both their productivity and the profitability of the company.

As a direct result of going “Upstream,” several positive things happened. First, the workers involved made more money by being incentivized (And, trust me when I say: not everyone bought into this concept. They left for what they assumed were greener pastures elsewhere…). Next, the increase in productivity levels was astounding, partly as a result of the remaining employees “buy-in” to the new process. Finally, the profitability of the company jumped dramatically from a seven-figure loss to a very healthy profit, as we had predicted!

This is just an example of what can happen when we go “Upstream,” and rather than just “putting out fires,” in this case on the Labor front, actually determine the true source of the problem and then work to preemptively correct it. In stark contrast to their old program, which wasn’t working for either the Company or its Employees, this new incentivized program worked better for both of them. My question for you is this:

“Where, when and how will you go Upstream in your business?”

If you will continually do this, I guarantee that you will continue to expand your future opportunities and profitability results! I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll continue to focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way on this process, please reach out at john@success-strategies.com or at 209-988-8960.

Are You Using “Pareto’s Law?”

Are you taking full advantage of Pareto’s Law? Vilfredo Pareto was an Italian economist who lived from 1848-1923. Of course, he was initially known for his observation that 80% of the property in Italy was owned by 20% of the population. This was later summarized into the Pareto Principle, which states that 80% of our results typically come from 20% of our efforts. This is also known as a Pareto Distribution.

Take some time and list all of the tasks that need to be completed in your business. You are probably already thinking, “John, all of these tasks need to be done!” Maybe so, but do they all need to be done by you? Not necessarily… Please allow me to explain. Even in the early years of my business, when I couldn’t necessarily afford to hire a lot of staff members, I had my children (Ages 10-13 at the time) complete filing, do inputs for Inventory spreadsheets & Client Activity Summaries.

This actually accomplished several things. They learned how to work, they took part of the load off me and they also funded their future college tuition through their efforts.

After you’ve made your list of tasks, I’d like you to categorize them into four categories:

L – Lead on these tasks. They are the ones that you do best in your business, simply because you have what my Business Coach Dan Sullivan calls a Unique Ability. You are really great at this, others recognize this positive skillset you have, and you enjoy it so much that the day just seems to “fly by.” They are the tasks that will likely also make you the most profits.

E – Eliminate these tasks. Do you really need them? If you are spending 80% of your time on these, and only getting 20% of your results, you are limiting your profitability.

A – Automate tasks whenever possible. I use tools like Auto-Responders on my website to expedite replies to some of my website requests. I also use some e-mail responses that cover Frequently Asked Questions or FAQ’s. What tasks can you automate in your operation? In this world of rising labor costs, you simply cannot afford to overlook this question!

D – Delegate tasks whenever possible. There are some tasks that just make sense to delegate to others on your Team or to a third-party provider. The question to ask is, “Can someone else do this task, perhaps even better than I can complete it?” In my own operation, I use a third-party provider to do my billing, payroll & several other tasks, which frees up more time to spend with Clients. In most cases, delegation will free you up to focus on more profitable tasks. I know this certainly has been true for me.

The ultimate question for you is “Where, in terms of your efforts, can you place 20% of your efforts and achieve 80% of your results right now?” Talk to your Team about this idea and where it can be applied. There may be some tasks that are 70/30 or 60/40, but they are still worth looking at.

If you will continually do this, I guarantee that you will continue to expand your future opportunities and profitability results!

I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll start my focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way prior to that, please reach out at john@success-strategies.com or at 209-988-8960.