Why not? Have you ever found yourself simply accepting what life sends your way? I think we all have at times; You know like the old song from Huey Lewis & The News “I’m taking what they’re giving ‘cause I’m working for a living.” Today I want to challenge each of you to join me in playing one of my favorite roles – that of the Contrarian!
During one of my recent business trips to California, I entered a gas station and, much to my dismay, I found that 1/3 of the gas pumps were blocked off by orange cones. As a result, they were unavailable for use, and as I shared that fact with my bride of 35 years, she commented: “Half of life is blocked with orange cones (the “Cone Zone”), isn’t it?”
What does it take to get to the Next Level? I believe this is a crucial question to be answering in any business. If we continue on the same pathway, will our business get better or could it potentially go downhill? An even bigger question is: “Who might replace my business?” Is there another player out there who could potentially disrupt my industry and take me out of the current process?
What Happens When We Wait Too Long? How to Take the Next Step.
Have you ever found yourself faced with a decision that, frankly, you know you need to make, but with which you just cannot seem to take the next step? I know I have, and there are times when all of us have been faced with just such a dilemma. Given the last three years in the dairy industry, with its lack of profitability, a lot of producers are looking at this same type of decision. You may be in this situation or know someone who is.
Many of them are trying to save money, and understandably so, but if they continue to fall behind on Accounts Payable or loan balances, what have they gained? If you find yourself at this cross-road, it is important that you stop and face reality. Don’t fall prey to the false notion that everything will suddenly turn around and be rosy. It typically takes some time to turn around, and, as the saying goes, “The best way to get out of a hole is to stop digging!”
As the financial returns of the industry get better, as they eventually may, will you be able to not only pay your current bills, but also catch up old Accounts Payable? That is a tough process to handle. It’s crucial that you don’t become complacent with this, because, while it may be challenging to handle, not doing so can cause irreversible damage to your finances. If you get too far behind, you may find yourself without adequate resources or the energy to overcome the necessary hurdles.
What can you do? I have found that most Clients who have faced difficult situations and were able to bounce back followed several success steps:
- Get it together financially. This requires that you measure where you currently are in your business. What are your strengths? What areas do you need help with? All progress begins with telling the truth. It will be the foundation for any sound transformation.
- Get the necessary help. With very few exceptions, I have found that lenders will be willing to help you reach your objectives if you know what they are. Even where they were unable or unwilling to participate long term, banks have usually worked with us long enough to acquire financing elsewhere.
- However, they need to know the plan you have in mind. So, build your plan! Know what you want to accomplish, what you’ll need to change to get there and where you might need assistance financially.
- Once you start to move forward with the plan of action, be sure to measure your results. This is the only way you’ll know if you are still on track or if you must adjust your plan. Just be sure to give the plan a chance to work, assuming it is built upon a solid foundation. Remember that “Rome was not built in one day!”
- Keep your lenders informed with regard to your progress. Often, your lender may have a situation where you have as much as a “65% Loan to Value.” That simply means that your Equity position is about ½ of what their loan position is. With this in mind, it is imperative that you keep them informed about your level of progress.
- I hope you’ve found this brief synopsis helpful. Remember to be sure you know where you are starting, what changes you’ll need to make, what your plan is to get to the next level, what your ultimate objective is, what your ongoing results are at all times, and that you are keeping your lender informed. Each of these factors will be essential to your future success.
If you need assistance with this task, 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.
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/
I wish you the best of success this year!
Developing the Genius in You!
In my last blog, I discussed being ingenious about how you approach your life and work and how we all we a touch of genius. If you didn’t get a chance to read it, please do yourself a favor and go check it out before you read any further. Trust me. This blog will prove to be more beneficial to you if you’ve read the prior one.
Since we have now established that every one of us has a touch of “Genius” built into our brains, let’s talk about how to use this to our advantage. As you work to achieve your goals and objectives for the year, as well as overcome new challenges in your business, it is imperative that we monitor our results. Some people call this “keeping score.”
Whatever you want to call it, it becomes a crucial step to your success for two reasons:
- It the one & only way you will know if you are making progress toward your objectives. Without doing this measurement process, you will not have a very clear idea of where you are on reaching the milestones you want to hit.
- Additionally, this will help to keep you motivated and moving forward. Now, I know some of you are probably saying, “Yeah, but I won’t be very motivated if I’m falling short…” My thought on that topic is that you then need to adjust your course & fine tune your plan. Your Team, with whom you should be sharing these particular “Goals and Results,” should also then be more motivated to want to help you hit the target. Most of them will be. If not, find a replacement ASAP.
On any objective, I feel the following steps are crucial! This concept comes from Dan Sullivan, founder of the Strategic Coach organization. He said:
- If you can measure it, you can understand it.
- If you can understand it, you can control it.
- If you can control it, you can then improve it.
The point is that if you wish to reach a specific objective in your business or life, you have to figure out how to measure it, i.e. track your results. Once you do so, your understanding of how it functions will increase. Then, when you understand this, you can determine how to control it. Finally, if you gain control over it, you and your Team will then know how to improve it, which will lead to a greater mastery of the process.
I suggest you use this process with any item in your business that is worthy of achieving. This is true of your Revenue generated, your control over Costs, your Labor Efficiency & many other items. If you take the time to measure these items and then make comparisons with industry standards, as well as how you’ve done in past years, you will get a clearer picture of whether you are moving forward or not.
If you need some assistance with this task, 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.
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/
I wish you the best of success this year!
You are a Genius!
Whoa! That may have been the best compliment you’ve received all day, short of that parting kiss from your spouse this morning as you were running out of the door. Let’s talk about how I know that are a Genius.
You are in town, picking some items up, when suddenly you spot someone on the sidewalk, coming towards you, to whom you wish to speak. You get five words off your tongue and suddenly realize that this is not at all what you wanted to say. You say to your brain, “I need three new words to improve the meaning of my sentence.” Your brain replies, “We’ve processed your request, and we have 500 possibilities that could correct your sentence.”
You tell your brain, “I don’t need 500. I need just three words to fix this sentence.” You brain comes back with, “We have reprocessed your request, and we have boiled it down to just 100 words that could complete your sentence successfully.” You say to yourself, “I don’t need 100 words. I need just three!” You brain comes back and states, “We recognize your challenge and have reviewed these 100 words. We now have 10 words to correct your sentence.”
In anguish, you tell your brain, “I don’t need 10 words. I only need three!” Your brain comes back and says, “We’ve reviewed those 10 words for the best three and here they are.” With that, you complete your sentence to that other person, with whom you are trying to establish some positive rapport, making a very positive impression. What you may find amazing is that your brain does this all the time, and guess what? What you just read in the last few minutes in the prior three paragraphs, your brain accomplishes in just seconds. Who, other than a Genius, could accomplish such a task?
Now that you know you are a Genius, how can you use this to your advantage? I believe there are several steps, all of which will help to build your confidence. First, you have to have a plan. If you don’t know what your goals or objectives are for this year, as the saying goes, “Just about any road will take you there…” However, I prefer to pursue the paths that I choose for my business, and I assume that you will, too. So, figure out what it is that you really want to achieve.
As a follow up to that point, be specific in stating what you want, and write it down. If you don’t put it in writing, you will be unlikely to remember it later, or, at best, you’ll be “fuzzy” on what it was you were hoping to accomplish. Additionally, having it established in writing will help you to stay more committed to the objectives you want to reach, and, as a side note, this will also assist you to share them with you Team. You know why?
Without your entire Team pulling in the same direction, you will be less likely to hit your targets for the year… It reminds me of the story about the salesman who was traveling and got his car stuck in the ditch. He approached a farmhouse nearby and asked the farmer if he could help pull his car out of the ditch. The old farmer stated that his tractor was in the shop being repaired, and all he had was an old, blind mule named Jesse. However, he would harness the old fellow up and try to pull the salesman’s car back onto the road. When the farmer hooked the old mule to the car’s bumper, he yelled, “Pull Oscar, pull! Pull, Raymond, pull! Pull, Jackson, pull!” and finally, “Pull, Jesse, pull!” With that, the mule yanked the car back up onto the road surface.
The salesman looked at the farmer and asked, “Why did you call all those other names, if you only had your old, blind mule named Jesse?” The farmer replied, “If Jesse thought he was the only one pulling, he probably wouldn’t have reached the goal, but when he thought the whole team was pulling for the same outcome, the task seemed much easier.” The same principal holds true when you are seeking your objectives for the year.
If you enjoyed this, check out our other material at www.success-strategies.com. If you’d enjoy a video version of some of these same subjects, check: www.YouTube.com under “John Ellsworth Success Strategies.” After all, it’s your business.
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/
Understanding Your Breakeven Levels
Do you know the break-even levels for your business today? If not, you may in trouble. Not because of today’s low milk prices, although those aren’t helping. The root cause of this trouble is that, without knowing these break-even levels, you are “flying blind.” You may currently have a cash flow challenge, but, worse yet, you cannot fix it because you won’t know if and when it has been corrected.
Please allow me to start by defining break-even levels, as I view them. They are the level at which, if all your other factors remain the same, you’ll break even on your cash flows. For example, if you are running a gymnastics class and are losing $100/month, you will need to sell four more memberships at $25/month without incurring any additional costs, or perhaps you’ll need to sell five more memberships in order to pay for the $25/month advertising that you need to run in order to generate these added sales.
Similarly, on a dairy operation that is averaging 71 lb/cow/day, but whose break-even production level is determined to be 75 lb/cow/day, you will need to increase production by four pounds per cow per day, while keeping all other revenue & expense items the same. This is a tall task, no? Well, yes it is, but do you want to win or not? There is a distinct possibility that we cannot get the 4 extra pounds of milk at zero cost. However, what if we spent $0.25/cwt more on feed and then, as a result of increasing our production levels, were able to lower our other costs/cwt (labor, insurance, etc.) enough that we were then above break-even? Perhaps there are other costs that can, indeed, be reduced, too. Please look at everything.
I had one dairy Client who had 800 cows, ran a 40% cull rate, could not expand and yet maintained 975 heifers. By simply reducing the number of heifers he was raising, his heifer costs were reduced to a more reasonable level, allowing him to then make money.
This is the entire point of completing your break-even analysis. You just don’t know unless you do the budgeting & break-even analysis with comparisons to your current actual levels. Cutting costs is not always the answer, as learned by some who tried to do so in 2009 with negative consequences. However, if your feed costs increase 3% and yield a 6% additional return, chances are good that you’ll eventually achieve break-even status.
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/
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 these calculations, please let me know. I welcome your thoughts and comments.
The tools to calculate your break-even levels are available to subscribers at our website www.success-strategies.com under the section entitled “Financial Techniques.” If you’d like to listen to a presentation I recently recorded on YouTube, you can do so at:
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“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!
What Happens When Banks Diddle? Why is Your Loan Taking So Long?
I know this is probably going to “ruffle some feathers,” but I believe it is a question that needs to be asked… Now, I know that all banks are being subjected to a massive increase in the number of “eyes” who are reviewing their loans, but give me a break. Just because they are being reviewed more often does not mean that it is a “bad loan…” The last time I checked, I don’t think the auditors are running the banks! They are only evaluating them.
I also want to clarify that I am not talking about loan situations where the Loan Officer is waiting on the arrival of a new financial statement. That makes a lot of sense. In fact, it is clearly logical. I’m talking about scenarios where, in spite of the difficulty of a borrower’s industry, they are still able to attain profitability. Nonetheless, their bank still keeps its finger on the “Hold” button. Why?
Often, it is explained that we need more “clarity…” Really? It looks fairly clear that these are the times when borrowers need the ongoing support of their lenders, not a bureaucrat who cannot make a decision. I spent a number of years on the line, making loan decisions. No one said it was easy, but that is why bankers get paid, isn’t it?
If they are worried, they should exit the credit. Why leave it hanging around, hoping for a financial resurrection? Give the borrower a deadline to improve or move out of the bank, i.e. find another lender. You owe it to your shareholders. If it’s workable, then move forward and give the borrower a greater chance to succeed. Here’s why.
For a borrower who is being delayed, they are caught in a conundrum. First, they don’t know if or when the loan is going to be approved, so they wait, instead of finding another alternative solution to their challenge. This hurts their results. Additionally, they get frustrated and start to lose their focus. Frankly, this can lead to poor management decisions on the part of a borrower.
You know the old saying, “When you are up to your eyeballs in alligators, it’s hard to remember that the original objective was to drain the swamp.” As a result, they start to think short term only, instead of focusing on the benefits of not just surviving, but also thriving and hitting their long term objectives. That, my friends, is no way to run a successful business.
Overall, nobody wins in these messy scenarios. Borrowers stress needlessly and tend to make poor business decisions or, worse yet, not make any decisions at all, choosing instead to operate by default. Lenders then can get strung out financially, too. Ultimately, getting the right information needed and then moving forward with a proactive plan is what I consider Next Level Thinking! 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!
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