Why Bother?

Ouch! That is the question I was asked by a producer in December 2018. Please allow me to put his question into perspective. He had suffered through four consecutive years of low milk prices, continually growing expenses (despite our supposedly have only “minimal inflation”), and no profits. These factors were the basis of his question, “Why bother?”

My response was fairly straightforward. If you measure Cash Flow, you can understand it. If you can understand it, you can control it, and if you can control it, then you can improve it! His reply? “Yeah, right…”

However, in my consulting during the past 22 years, I have experienced the difference that measuring items such as your cash flow regularly can make:

  1. If you measure it, you can indeed understand it. It allows you to catch severe cost increases quickly before they get out of hand. Since these changes directly impact your break-even levels, they flow directly toward the “bottom line.” You can also use these cash flow measures to set your milk price floor within the Dairy Revenue Protection program.
  2. If you understand your cash flow, you can control it. You’ll know exactly what steps to take to positively impact it. Looking at your break-even levels, you can determine just exactly what changes you need to make in order to achieve improved profitability.
  3. Finally, if you can control it, you can improve your cash flow results. Isn’t that the objective of every business operation?

I can’t emphasize the significance of this formula enough. The example I used above was just for cash flow, but it can also be applied to any number of other operational measurements. Here are a few examples:

  1. Financing – This type of CF Analysis has impacted a large number of my Clients during these past 22 years. Frankly, it has impacted every one of them to be more profitable. If there are any exceptions, that producer wasn’t very serious about making any changes. They were hoping for a miracle, getting better without changing anything…
  2. Nutrition – I believe that most Nutritionists do a great job. Given the dairy producer’s Revenue & Expense levels can equip them to do an even better job of helping you become more profitable. The resulting break-even levels of your cash flow analysis will tell them exactly what you can spend on feed and still make money. The days of just maximizing milk production “at any cost” are over. This tool of cash flow analysis can assist you & your Nutritionist to be even more successful!
  3. Advisors – Whether we are talking about labor efficiency or any number of managerial items, cash flow & break-even analysis will provide you with the tools you need to make smarter decisions. For example, what is the impact of adding one more employee in the milk barn on your CF or break-even levels? With this information at your fingertips, you will know. Considering that milk prices haven’t really increased anywhere near the proportion that your expenses have during the past 40 years, improved efficiencies are absolutely crucial!

Going back to the original question, “Why bother?” your very survival depends upon it. Based upon my experiences of the past 22 years, it will make a huge difference. If I can assist you with this analysis process, please contact me at john@success-strategies.com or 209-988-8960.

Moving Beyond Survival!

Wow! This has definitely been a tumultuous year in the dairy industry, following the COVID-19 pandemic’s impact. However, if you are reading this, you’ve survived it, and that’s fabulous, but what’s next?

What new items, if you achieved them, would substantially push you forward? What would represent a major breakthrough for your Business, your Team or your Family?

You don’t need to be Superman to get this done. Even Muhammad Ali, one of the best boxing legends of all time, had limitations, but that didn’t hold him back. His limitations became obvious when he was flying somewhere in the world, and the flight attendant kindly asked him to put his seat belt on.

Ali, never one who was short of witty responses stated, “Superman don’t need no seat belt.” To which the flight attendant replied, “Yeah. Well, Superman don’t need no plane either…”

My point? As you approach these new areas & challenges, think it through and start small. Lay out your game plan, and then start with small steps. So, what if you stumble? It’s no different than learning to walk. If a baby falls while walking, we don’t put that child back in their crib and say, “That does it. You blew it. No more walking for you. We’re not trying that again!”

Of course not. We encourage them to try it again and again until the child gets it right and can walk on his or her own. And, then we celebrate that achievement, too. Yes!

Likewise, when you’re lifting weights, you wouldn’t start with 120 pounds. No, you’d start small and build you way up to that 120 pounds level. You wouldn’t train for a marathon by running 26 miles on day one. You’d work up to that by race day.

You need to clearly define your objective, your goal. Then, you outline the small steps that will help take you there. What do you want to pursue this year, as you move forward? Only you know the answer to that question. Take your time, take small steps, as needed, and move closer to your dreams. This was best summarized by author Kendra Adachi in her book The Lazy Genius: Embrace What Matters, Ditch What Doesn’t, and Get Stuff Done. She states:

“When you start big, you give up before you even begin, but the smaller the step, the more likely you’ll do it. The more you do it, the more you’ll keep doing it, making it a meaningful part of your daily rhythm which is the point. Embrace the power of small steps. They matter, they count, and they’re the best way to create habits around what actually matters to you.”

Best wishes with your success plan. If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

Succeeding in Spite of the Opposition!

Do you ever get frustrated with negative people? I know I do. You know the type I’m referring to – the ones whose “glass is always half empty but never half full…”

My lovely bride of 38 years shared a passage with me that came from a book she was reading entitled Girl, Wash Your Face by Rachel Hollis. Now, I cannot tell you a lot about the book because I didn’t actually read it. However, she spoke very highly of the book, and I think it contained some valuable lessons that I want to share with you.

Why do some people succeed at tasks, while others fall short of their goal? Rachel Hollis sums up the failures quite well. She states, “It’s simple, actually. It’s not about talent, skill, money or connections. It’s because when they went after their dreams and came up against a roadblock, when they experienced rejection, or when someone or something told them no…they listened.”

I ran into the same thing 22 years ago when I was considering the development of my consulting firm Success Strategies, Inc. Many said, “John, why would you leave a successful banking career for the uncertainty of having your own business?” I had a dream and followed it.

I never asked anyone else to manage that dream for me. Whenever I wasn’t sure what might be the future outcome of a decision, I would weigh out the pros and cons, consider the potential likely outcomes, and then make the best choice that I was capable of. As the character Gimli stated in the Lord of the Rings movies before going ahead with their battle plan & rescue mission, “Greatly outnumbered. Certainty of Death. What are we waiting for?”

How does this apply to your business & life? Here are some gems from Rachel Hollis:

  1. “I am successful because I refused to take no for an answer.”
  2. “When it comes to your dreams, no is not the answer. The word no is not a reason to stop. Instead, think of it as a detour or a yield sign. No means merge with caution.” Just re-evaluate your position & direction.
  3. “It’s all about perception.” Is your perception accurate? Is it factual? In my case, I was so sure that my Success Strategies concept would work, I went ahead and left banking, its good salary & benefits package. I had enough savings to last for 12 months if things didn’t work out, but we never used those funds.

What plans do you have that you want to pursue, either in your current operations or in some new avenue? Why not start today? I wish you the best of success, and when you encounter the “no’s,” evaluate your plan to make sure you are still on course. With regard to those “No’s,” here is one of my favorite quotes:

“The dog barks, but the band marches on…”

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

From a Distance, it looks like…

I recently read an interesting article in Inc. magazine by Bill Murphy. It talked about the value or cost of “Social Distancing,” which seems to be a hot topic these days. Yes, these are trying times with the rules put in place to offset COVID-19’s impact, but as we go through our regular routines, perhaps there are some valuable points for consideration.

He referred to recent research led by Dr. Barbara Lee Fredrickson, the head of the Positive Emotions & Psychophysiology Lab at UNC. She and her team surveyed 600 Americans to ask about their daily activities to see if there was any correlation with their overall emotions.

Interestingly, they found that survey participants who had spent time in the prior 24 hours “passively scrolling through social media or interacting with others purely through chat or texts,” reported feeling negative emotions. Those surveyed who felt positive emotions included people who had exercised, relaxed (e.g. with a hobby), engaged in spiritual activities (contrary to the limitations imposed by some politicians…), interacted with others face-to-face, or went out of their way to assist others!

The overall message of Dr. Fredrickson is this: Instead of “Social Distancing,” let’s implement a program of “Physical Distancing & Social Solidarity.” How can you implement this in your business? Here are a few suggestions:

  1. Encourage your employees to exercise, even if it means going for a daily walk.
  2. Help them to connect with others, with caution, of course.
  3. Let them engage in “self-care” & “spirituality” activities.
  4. Show them, by example, how to help others, even when it’s less than convenient.

Granted, you and I cannot necessarily change the whole world, but we can absolutely have a positive effect upon the people we lead. It’s certainly worth a try. Why not start today? I wish you the best of success!

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

Are You Adequately Covered?

As the cost of buildings on your operation continue to rise each year, you certainly wouldn’t think of not covering their replacement with adequate insurance. Yet, have you done the same thing with the primary source of revenue in your business?

For most dairymen, Milk Sales represent 85-90% of their total revenue streams. This would seem completely prudent, given the increased levels of volatility in the dairy markets… It’s been almost two years since the introduction of the Dairy Revenue Protection (DRP) Program, but are you using it?

If you study the program, it is a fairly straightforward method for placing a floor under the milk price you receive at your dairy. You can choose to protect your Class 3 price, your Class 4 price or you can use your components as the basis for protecting your milk price, assuming that fits your operation better. The key question here is – Have you looked into DRP yet? If not, please do so soon.

I believe you can go ahead up to five calendar quarters. Of course, since the price protection is based upon the use of “Put Options,” which place a floor under your prices received, the longer into the future you contract, the greater the cost of those Put Options will likely be. Their cost can also increase when markets are more volatile (such as this year…) and if you select higher price coverage levels (e.g. $18/cwt vs. $16/cwt.)

However, there is some good news on the cost front. Currently, the federal government is subsidizing the cost of the DRP options by about 40-45%, so if an option costs $0.60/cwt in the open market, your net cost through DRP will likely be about $0.36/cwt. So, how do they pay out?

At the end of each quarter, if the market prices have been higher than those you had set as a floor in the DRP program, these Put Options will expire unused, and, unfortunately, you will receive a bill for the cost of that quarter’s Puts. That’s the bad news. The good news is that since the market was stronger than the level you had set for coverage, you should have been receiving higher milk prices & thus be able to pay this premium. And, please remember that you can do less than all of your milk; I believe you can also set this up with multiple tiers of coverage, e.g. 25% of your milk one week and then another 25% the following week. The costs of the two 25% coverages may be different, but as long as you contract before the required deadline (around the 15th of the month before the next quarter begins), you’ll be covered for the level you select. You can also go into your DRP account every day, if you wish, to monitor your progress/potential payout levels.

Is this DRP program perfect? Probably not. I’m certain that if we study it long enough, we can likely find some characteristic we don’t like… However, it can put a “floor” under your overall milk price received, the premiums are government subsidized, you have numerous different input factors that you can use (e.g. Class 3, Class 4 or Components), and you don’t even pay the premiums until the month following the quarter for which you were covered. As a result, you can pay the “premiums” out of the DRP coverage you received or out of the higher milk prices you collected if your DRP coverage didn’t kick in.

Yes, you will be out the cost of the Put Options, but do you call your insurance agent at the end of the year if your house doesn’t burn down, despite having it insured? I didn’t think so…

Given the higher levels of volatility due to market conditions, unforeseen events such as COVID-19, or disdain for some variables in our trade agreements, don’t you owe it to yourself to be covered? Take action now! I wish you the best of success!

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

Throw Me to the Wolves…

I recently read a quote from the famous playwright & philosopher Seneca that stated:

“Throw me to the wolves, and I will return leading the pack.”

As we discussed in my last blog/article, our industry is currently at an “Inflection Point.” Essentially, that means that we are a point of major change, one that completely alters the way in which we must think and take action. As a result, we must take positive steps in order to avoid being “run over.”

Thirty years ago, a producer could survive (please note that I did not say “thrive…”) by doing a solid job of breeding and managing cows for maximum production. Feed costs were quite reasonable, and while a dairyman didn’t necessarily get rich, he could pay all of his bills and service the mortgage successfully.

Forty years ago, many people held the same jobs for their entire career. There was job security for life… Today, job descriptions are constantly changing, we see lower levels of company loyalty, and many change careers regularly, either out necessity or a desire to seek new opportunities.

Realize that many factors have changed, both within and outside of our industry. Thus, our best approach to succeed is to follow the advice of the Boy Scouts and simply, “Improvise, Adapt and Overcome!” We absolutely need to come to grips with reality and prepare for constant change.

What changes do you need to consider?

  1. On Labor Efficiency: Have you considered the positive benefits of Robotic Milkers, Robotic Feed Pushers or other forms of automation? Have you considered their cost vs. their effectiveness & efficiencies?
  2. Your Marketing Program: Do you have an effective Marketing Program for selling your milk at a price that provides you with a positive profit? Consider the Dairy Margin Coverage Program (DMC) or the Dairy Revenue Protection Program (DRP) for your business.
  3. On Reproductive Efficiency: Are you using the tools that are available to you to ensure that your Pregnancy Rate runs in the 25-30% level? Synchronization and Double Ova-Sync programs can help you maintain your Days-In-Milk (DIM) at a level that is consistently in the 160-165 Day range. That’s where the “money” is!
  4. Knowing Your Break-Even Levels: Do you really know your operation’s Break-Even levels for Milk Price, Feed Costs & Milk Production levels? If not, take steps today to grasp a better understanding of this information. It can guide you to greater profitability!

Returning to the Seneca quote above, we need to realize that we all get “thrown to the wolves” occasionally. That is almost a given in life today. The variable is how you deal with this process. Do you adjust your course or just give up out of frustration? Make the changes suggested above, and I believe you’ll thrive as you move forward. Our industry is changing very rapidly, so don’t delay. Take action now! I wish you the best of success!

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

 “Throw me to the wolves, and I will return leading the pack.”

                                                            Seneca, Playwright & Philosopher

Choose Wisely!

I recently was reading about a presentation by Damien McLoughlin, marketing professor at the University of Dublin, within which he explained that our industry (in fact, all industries) are currently at what he describes as a “Strategic Inflection Point.”

What other potential options have arisen over the past several years in the dairy industry? How about robotic milkers? What about robotic feed pushers? What about price insurance programs such as DMC or DRP? Have you adopted them yet?

This was most recently inflicted upon us by the COVID-19 outbreak, and he explained that at some point, all businesses will face an inflection point that significantly alters the way we think or act. Obviously, COVID-19 has caused this with the restrictions placed upon us for travel and the increased use of Zoom meetings and other online tools.

Mr. McLoughlin states, “After an inflection point, all bets are off; the industry changes. The forces that drive that change are rarely a surprise, and the change, which appeared to be so gradual, then suddenly comes into play. And the opportunities are there for those who are ready.”

He added, “We’re in a time of enormous challenge, but challenge always presents opportunities.”

What type of opportunities currently exist for you? Are there some in terms of expansion, increased efficiencies, or higher levels of price insurance? What strengths do you have going for you? Are you currently well prepared or do you need additional resources? What advantages do you have? Who else can you consult with on this challenge?

Have you developed your own strategy to succeed at a higher level? Our industry is changing very rapidly, so don’t delay. Take action now! Choose wisely…

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

 “When I was young, I always said I wanted to be someone. Now that I am older, I wish I’d been more specific.”

                                                            Gilda Radner, Former SNL Comedian

Hope is not a Strategy!

I recently was visiting with a prospective Client who made the statement, “Well, we’re hoping to get above 80 pounds per cow this year.”

That’s a fabulous goal, but not a very defined strategy. Now, just so you understand, this was an operation on its third generation, and they had never consistently been above 72-73 pounds per cow per day. As a result of our discussions that day, they did become Clients of mine, but only after I convinced them that they needed a more refined strategic plan.

We started with the following steps:

  1. Regularly scheduled Management Team Meetings – During these, we established this new goal of hitting 80 pounds per cow per day, focusing on cow comfort, fine tuning of their feed rations and getting their Days-In-Milk to be consistently in the 160 to 170-day range throughout the entire year. We also developed some plans for ways to holding this production level consistently by focusing on Close Up management and milking frequencies on fresh cows.
  2. Regularly scheduled Finance Team Meetings – Within these sessions, we directed our discussions to their Debt Structure, various Financial Challenges, and opportunities with programs such as DRP, PPP, EIDL, CFAP and EIEIO… Just kidding on that last one! All of these programs, except the last one, offered some serious benefits to producers if they were used in the right circumstances.
  3. Regular measurement of Actual Results vs. Projections – This is crucial on your financial numbers, as well as on your Management Results, such as DIM, Pounds per Cow, Herd Health and many other measures.
  4. Fine tuning our strategy, as needed. This is just like an airplane pilot. They have a travel plan, but they then adjust course throughout the flight, based upon changes in weather patterns and other items.

This type of strategic planning has worked very effectively for over 21 years for my own Clients. I will leave you with just one question: Have you developed your own strategy to succeed at a higher level? Our industry is changing very rapidly, so don’t delay. Take action now!

If I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

 “Wherever you are in life, you made an appointment to be there.”

                                                                                    Les Brown

Have you Given Up or Given Your All?

While I realize that the last few months have been difficult with the onset of the Corona-Virus and the severe decrease in milk prices, I hope that you are currently regaining focus and setting new objectives for your operation.

I know what you’re thinking… “Geez, we just got through the four & a half years of low prices, I was making some progress on my credit lines, and then BAM! The markets tanked again!” I don’t blame you for being disappointed by this downturn. It’s not your fault. However, it is your responsibility to take the steps necessary to move forward.

I recall one of the “turn-around” situations that I was consulting on during the 2015-2019 downturn. When I arrived, the Client had essentially given up all hope of recovering. That was the first item that needed to change. It was imperative that they believe that it was, at least, remotely possible to be more successful. Then, with that behind us, we set a strategy to help them achieve this goal.

Of course, this was not exactly easy with their banker trying to force them out of business. Now, at some point they may want to exit the industry, but no one should be forced to do this at the “bottom!” Thus, once I got the bank to back off and actually work with us, we developed a plan for greater success. After six months, the bankers actually started to believe that this producer could succeed, but they added, “Let’s see what the year end financial statement looks like…”

In the end, this is what happened. This dairy operation achieved a turnaround in excess of $1,100,000 versus the prior year. After the previously mentioned “change of thinking,” these were the steps we took to get their operation back “in the black” in terms of profitability:

  1. Set some challenging Objectives.
  2. Share these with your Bankers. Besides giving yourself some objectives to achieve, this does two other things. First, it keeps your Lenders informed, and it also let’s both of you know how you did vs. the goals.
  3. Measure your outcomes regularly. How else can you know with any degree of certainty how you are doing? Knowing this and then adjusting your course, as needed, is crucial to helping your business survive & thrive.
  4. Move the bar up! As you achieve better results, keep your Team informed and involved, and then keep setting higher objectives. These goals must be achievable but also challenging!

Regardless of what your position is today, you can, indeed, bounce back. I’ve seen so many scenarios like the one described above, where the participants had given up, but we still were able to succeed. I wish you the best of success in that endeavor, and if I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

 “All you can do is all you can do, and all you can do is enough.”

                                                                                    Les Brown

Maximizing Your Forward Progress!

In my last blog, I described the process introduced by Dan Sullivan, President & Founder of the Strategic Coach organization, in taking you to the “New Normal” for your businesses. Dan explained that as you move to your “New Normal,” you will be defining a better future for yourself.

I went on to say that once you define what, exactly, that new future includes, it is essential that you outline the steps to take you there. You may recall that I suggested you make the future outcome you desired specific, measurable and attainable, while providing you with a foundation upon which to build your bigger future.

With these points in mind, I hope that you set future objectives that are challenging and exciting. However, please don’t get frustrated if your progress is slightly slower than you want it to be. The key is to keep moving forward.

In uncertain times, we don’t always have 100% control over the outcome. However, that is no reason to not continue to push forward. I recall coming home from a Duke basketball game that my daughter Melanie and I had attended in North Carolina. While we thoroughly enjoyed that game, we were both anxious to get home. However, while we both had plans for the next day, the weather had different plans for us…

In spite of an ice storm, we were able to get as far as Washington, D.C., but after a five-hour delay, our pilots became “timed out” and couldn’t fly again until the next day. As it turned out, we were blessed with an overnight stay at a very nice hotel in the area, compliments of United Airlines. Additionally, we were treated to a nice breakfast the next morning. As I recall, I think we even received a free pound of Dunkin’ Donuts coffee out of the deal! We returned to Kansas City by noon the next day and barely missed anything.

Using this example, let’s say that one of your “New Normal” objectives is to return to profitability and achieve this on a consistent basis. This is an admirable goal, but I think it is safe to say that you may not have complete control over this outcome. The current state of our economy & the milk markets could slow your progress.

However, it is still important that you outline the steps you can take to move closer to this goal. Can you use DRP, contract more of your feeds or negotiate some of your costs? Speaking of costs, are there some items that you need to improve? Instead of maintaining a fleet of equipment and doing all your own farming, should you consider hiring a custom operator? Could you be that custom operator for other producers?

While your progress can be slowed down by factors beyond your control, the key is to consistently take action. Former Navy Seal Pat Dosett and Stanford University Neuroscientist Andrew Huberman state that “It isn’t about how much you do, but that you do something specific you are certain you can complete.” Forward progress here is key. They go on to say, “By taking action, you train your brain to repeatedly release dopamine, enhancing your energy levels and creating an outsized effect on your thinking, mood, and sense of what you can control.”

This perceived control will move you closer to your objectives! I wish you the best of success in that endeavor, and if I can assist you in any way, please let me know at john@success-strategies.com or 209-988-8960.

 “Planning is bringing the future into the present so that you can do something about it now.”

                                                                                    Alan Lakein