“Are You Sure About This?”

Following my last article, I was asked by several producers what they could use as a measuring device for reaching their objective of achieving greater profitability. After reminding them about what my Business Coach Dan Sullivan stated, “All progress begins with telling the truth,” I added that they absolutely have to know their Break-Even levels. Break-Evens, as they are called, represent the levels of milk production, cost/cwt or milk price per cwt that must be achieved to at least break even, or, in other words, not lose money…

This is fairly straightforward, but some people have a challenge with this concept. More definitively, your Break-Even Cost per cwt, is the level of costs that will keep you from losing money, based upon the current level of milk production you are achieving and upon the current milk prices you are receiving.

This is relatively easy to calculate. You take your current costs for a given time period and divide those by the number of hundred-weights of milk you are producing in the same time period. For example, if you are producing 10,000 cwts and your costs to do so are $155,000, your costs per cwt are $15.50. However, if you are losing $5,000 during the same time period, your loss per cwt is $0.50, meaning you need a $16.00/cwt milk price to “Break Even.”

Why is this important to know?

  1. Your bank will not finance continued losses. Ask anyone who has tried this during the past four years. It doesn’t work anymore to just “bank on the future…”
  2. You need to know your Break-Even Cost of Production, just so you understand what the impact might be of any costs changing. Need an example? If your feed costs will be increasing next year (your Nutritionist should be able to project this, based upon your contracts), you will be able to clearly see what its impact will be.
  3. What if interest rates increase in the future? You can only run various “What If” scenarios if you know what your current costs & break-even levels actually are.
  4. Finally, knowing your Break-Even levels will allow you to plan for future changes. Can you milk 50 more cows with your current labor force and your current Fixed Costs? If so, this will definitely change your Break-Even levels.

In all of these examples, this is powerful information for you to have a firm grasp on. If I can assist with this calculation, please let me know. Additionally, as you think about how to overcome this business challenge, ask what action you need to undertake this week!What will you do differently, going forward?

Here’s a suggestion for you. Sign up for our new Success Strategies Business Navigator Program. If you are open to learning new concepts and discussing them with other producers, you should take a look at this new program that will start in early 2020. It’s completely online, freeing you from travel but offering you an opportunity to learn from industry experts in the areas of milk marketing, management, financial analysis & banking/finance. For the value of the milk production of one 85 lb cow for a month, you can enroll in this quarterly workshop program for one year. What have you got to lose? Check it out at:    

https://success-strategies.com/navigator-program-for-dairy-farmers/

You won’t regret it. I wish you the very best for a success-filled year!

“There is No Try!”

I was recently reminded of an old episode in the Star Wars movie entitled The Empire Strikes Back, where the famous character Yoda encourages young Luke Skywalker to use his mind to accomplish a task at hand. The task, no easy feat, is to retrieve his disabled spaceship out of a remote bog where it has sunk, but only by using his mind…

Do you remember their verbal exchange? Young Luke, thinking this task was nearly impossible, agrees to give it a “try.” Yoda, in the quote he is famous for, states, “No. Try not. Do. Or do not. There is no try.” In case you need a refresher, here’s the link:

Are you facing some similar challenges in your business? I’ve recently completed two Client refinances, both of which took a long time. In spite of being profitable, their lenders just were just not willing to stretch in the way that we needed them to go. After their refinancing, one of these Clients is now working on their third straight year of being profitable, and the other one is working on year number two of profitability.

What has been the secret with these folks? Yes, their prices have improved, but more importantly, they didn’t just decide to try. They established guidelines that said they were not going to fail. They would do whatever it took to get profitable again. They turned over every stone to determine what needed to be changed!

Just in case you are wondering, please understand that there is a real problem with saying you will “try to do something.” The issue is that when we say we will try, we don’t actually have to commit to doing anything substantial. I’ve witnessed this phenomenon many times in the past. Essentially, it gives us an excuse for not accomplishing the task at hand. Trying is not the same as doing something!

Here are some recommendations:

  1. Forget trying. As the famous Nike commercial states: “Just do it!” Push forward and don’t take NO for an answer.
  2. Realize that it’s been done before. I’ve seen Clients get their Accounts Payable caught up before, by cutting their overall costs of production by more than $2.00 per cwt.
  3. As my Business Coach Dan Sullivan says, “All progress begins with telling the truth.” Recognize what your current position is, use that as a starting point, establish what must change, and then measure what your results actually are.
  4. Stay committed to the process. In the Client examples stated above, some people said I was crazy and cited examples of where this type of thinking didn’t work. However, I know that sometimes you just have to tune out the “noise,” and simply get it done!
  5. Maintain no “Sacred Cows.” Regardless of who is selling you something, take a close look at that product or service. You can’t help that person’s sales, if you go broke. Purchase only what you need and what you can afford within the limits of your Break-Even levels. It’s the only way you can succeed.

As you think about how to overcome your business challenges, ask what action you need to undertake this week!What will you do differently, going forward? Think about it.

Here’s a suggestion for you. Sign up for our new Success Strategies Business Navigator Program. If you are open to learning new concepts and discussing them with other producers, you should take a look at this new program that will start early next year. It’s completely online, freeing you from travel but offering you an opportunity to learn from industry experts in the areas of milk marketing, management, financial analysis & banking/finance. For the value of the milk production of one 85 lb cow for a month, you can enroll in this quarterly workshop program for one year. What have you got to lose? Check it out at:    

https://success-strategies.com/navigator-program-for-dairy-farmers/

You won’t regret it. I wish you the very best for a success-filled year!

Fighting an Uphill Battle!

I was recently reading a review of the comments offered by U.S. Agriculture Secretary Sonny Perdue while he was visiting World Dairy Expo in Madison, Wisconsin. I wasn’t there, so I am not defending his commentary, nor am I saying he is totally right or wrong. However, I believe that his speaking points hit on some relevant thoughts.

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Rome Wasn’t Built in One Day!

This is an old expression that I’m sure you’ve heard people express many times. You know what? It’s true. Recently, however, I’ve been surprised to hear some bankers and vendors to the dairy industry exclaim their surprise by stating that they cannot understand why producers aren’t catching up more quickly on old Accounts Payable.

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“The Art of Racing in the Rain!”

I recently saw an excellent movie by the title listed above, and I must tell you – It was a wonderful and very touching story. I’d highly recommend you see it! However, I’m not going to tell you any more about the story, simply because I don’t want to spoil it for you, but do yourself a favor & go see it.

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Knowing What To Do!

I was recently talking to a new Client about the areas of their business, particularly some of their Costs/cwt, that needed to be improved as we move forward. In response, he and his bookkeeper stated, “John, as a result of your help with these measurements, we know what we need to do. We’re just not sure ‘How’ to do it.”

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Re-inventing Your Future!

Does the name Coco Chanel ring a bell for you? Your Mom probably used her products when you were growing up. I know my Mom did. Coco Chanel was a French entrepreneur who founded the famous fashion & perfume brand Chanel. I know – you’re probably asking – where am I going with this?

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KPI’s and Your Profitability

During a recent interview I completed on Dairy Business.com with Joel Hastings, I mentioned that several Key Performance Indicators (KPI’s) on dairy operations, such as Pregnancy Rate (P/R) and Days in Milk (DIM), can provide a clear reflection of your profitability.

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We Can Do Better Than This…

Recently, it seems like I hear a lot of comments about how people aren’t doing better, either because of the President, some Congressman, some policy or some other factor out of our control.

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A Solid Lesson on Leadership

Recently, I heard a classmate from my MBA program at Duke University deliver an excellent message on Leadership and what it takes to truly be a leader.

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