Ray Kroc, the entrepreneur behind the McDonald’s Corporation, stated, “I didn’t invent the hamburger. I just took it more seriously than anyone else.” Likewise, I didn’t invent Cash Flow Analysis. I have simply taken it more seriously than most people for over 20 years. Why?
I recently met with a Client of mine and his Lender. In spite of all the positive changes being made at this operation in terms of his reproductive program, efficiency measures, and higher than ever milk production, we were quickly informed that “The Sky is Falling!” I thought to myself – Why, after the last four years & all the difficulties we have faced and overcome during that same time, would anyone suddenly conclude that the sky is falling?
You may find the title listed above to be sort of strange… Or interesting? Or antagonistic? However, I really intended for it to be “stimulating” for you and your thought process. In essence, if your Annual Goals could speak, would this be a question that they would be asking you?
I was thinking recently about the many Clients we have assisted with the development of what I call a “Financial Plan” to take their business to higher levels of profitability and success. I have literally been doing this for 21 years at this point, and this may come as a shock to you, but in most cases these Clients didn’t want a “Financial Plan.” Let’s consider some of the reasons for this.
I recently was talking with a Client about the achievements he had been enjoying the past two years, despite the downturn in the dairy industry. Suddenly he added, “John, we’ve been getting sound results, especially in comparison to the rest of the industry, but, man, it just seems so slow in comparison to what we used to do 10 years ago…”
I recently received an e-mail from a reader of one of my previous blogs, expressing his concern that he wasn’t quite sure that he could get his business where he wanted to take it in the future. After describing the situation with his current lender and the various cash flow challenges he was having, he asked me if I thought there was any possibility for him to move forward.
In one of my previous blogs, I had referred to comments from Viktor Frankl in his book Man’s Search for Meaning, where he stated that his survival at Auschwitz, the vilest of Nazi concentration camps, depended upon the realization that his old life was over. His new life and future would be vastly different.
In my last blog, I talked about knowing your costs of milk production on a per cwt basis. While some may be thinking that knowing this number is great fodder for your local coffee shop conversations, there is truly a lot more benefit to knowing this number. If you know your cost per cwt, you will be positioned to complete a number of tasks. . .
Recently, I was reading a book entitled Your 5 Day Weekend and discovered the following quote, which was part of an analysis that the authors Nik Halik and Garrett B. Gunderson were relating to their readers about the dangers of the historical mantra of putting in our 40-hour work week and then retiring, after which we would get to live on about 40% of the income that we had previously received each week when we were working. I’m not here to judge the merits or challenges of doing this, but it got me thinking about another “drug” that we sometimes get trapped by when we are in business.
Wow! This has been a difficult start to our new year. Cash flowing has been difficult with milk in the neighborhood of $14-15/cwt. Given the rising cost of so many inputs and the recent difficulty of acquiring the financing you need, what can you do? Most banks still seem to understand this, but there is, at best, the possibility of delays on loan renewals because even their patience with the dairy industry has been wearing thin. One of the items I am most concerned about, in the entire scenario of finance and the world economy, revolves around the seeming presence of paralysis – that is, the inability to make a decision.
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