Keeping Your Business on Track!

For a fascinating example of speed and action combined, just watch what happens in the pits at an Indy car race. As outlined in Fast Company’s book The Rules of Business, there are four primary rules that guide both the driver and his pit crew in their respective roles.   “The faster you go, the more you need to talk.” Everyone needs to be clear about what is going to be done by whom and when. Constant communication is vital. Strong communication can present the difference between success and failure. When you are running a business, sound communication between participants, including key employees is crucial. This is especially true in today’s dairy environment!   “Don’t panic when someone overtakes you early on. Stick with what got you here.” If you complete a goals and disaster agenda outline, you should be well prepared to stay on the track to success. Plan your work and work your plan.   “Whatever it takes, stay in the race. Keep moving and fix problems on the fly whenever possible.” Yes, stuff happens, so stay prepared to make adjustments. Maintaining a positive attitude can often make the difference.   “Make the most of downtime. It is inevitable that there will be some downtime. Make the necessary repairs and re-energize.” I admit that in my hectic professional role this is often one area that I overlook, too. However, we need to take the time to recharge our bodies and brains so that we continue to exhibit clear thinking, i.e. a good night’s sleep and an occasional trip to Starbucks to just think is not a crime… To survive and thrive, we need to move faster, act more decisively, and respond more courageously. There has never been a better time to increase our efficiencies than now. Just because you have always done something in your operation, such as raising your heifers on site, does not mean it makes the best sense today. Consider all the relevant factors – cost, environmental pressures, employee impact and other issues. Then decide what works best for you. Are there some “roadblocks” in your operation? Are there items that are affecting your overall performance or productivity? Could today be the best time to change those items? Are you tracking key efficiency measures such as?

  • Cows per full time employee
  • Pounds of milk per cow per day
  • Feed Cost per cow per day
  • Number of days in milk for your herd (This tells a lot about your breeding, your number of fresh cows and other factors.)

You decide which factors are most relevant for your operation. Compare your results to the rest of the industry but also compare this year’s results to your business performance in prior years. This will tell you whether you are going forward or backward. Knowing this can be critical to your financial results. So, take a close look. I think you’ll be glad you did!

What’s Next?

Wow! 2015-2016 have been difficult in the dairy industry. No one, as I write this, has been cash flowing with milk in the neighborhood of $14-15/cwt. Can anyone at this price level? Given the rising cost of so many inputs and the recent difficulty of acquiring the financing you need, how can you? Most banks seem to understand this, but there is, at best, the possibility of delays on loan renewals. Thank goodness, we are seeing relief on feed costs. However, in the entire scenario of finance and the world economy, my biggest concern revolves around the seeming presence of paralysis – that is, the inability to make a decision.   What can I do now, you ask? Here is what I have been doing with clients for years in an attempt to free up any paralysis of their thinking. This concept was actually developed by Dan Sullivan, president and founder of The Strategic Coach organization in Chicago. As you go through this process, please keep in mind what Dan has often reminded his clients of, “All progress begins with telling the truth.” Here’s how it works:  

  • Take a sheet of paper and draw lines to break it into four quarter sections.
  • In the top left quarter, write “DANGERS” and list the items that are possible sources of loss for you, e.g. low milk prices, lack of feed inventory, reproductive problems in your herd, etc.
  • In the top right quarter, write “OBSTACLES” and list items where you are stuck, i.e. can’t seem to move forward. Possibilities here are your present cash flow, the need to plan for the next generation or other areas.
  • In the bottom left quarter, write “WEAKNESSES” and make a list of items where you are lacking a resource. Some examples might include new financing needed, a feed loan that is presently greater than the value of your current feed inventory, or the lack of CPA prepared financial statements.
  • Finally, in the bottom right quarter of your sheet, write “SETBACKS” and make a list of all items that you have actually lost in the current downturn. These might include your profitability, your lending relationship with your bank, some of your former suppliers or other items.

  After you have made your list that fits into each category, review each of them and ask yourself if all the items on the lists are equal to each other. Circle the item on each of the four lists that is most critical. Which of them is most important to the future of your business? What can you do about each of these four top items?   Remember, our objective here is only to “UN-paralyze” your thinking. It has been my experience, thus far, that this exercise frees up clients’ thought processes and then accomplishes two other tasks. First, it identifies specific problems you are facing. Additionally, it helps you to identify potential solutions, and that is what this is ultimately about.   As Victor Frankl said of his experience at Auschwitz, the vilest of Nazi concentration camps, his survival depended upon the realization that his old life was over. His new life and future would be vastly different. The same holds true for us in the dairy industry. The old game is over. We are in a new game now. Even when we start to see the next upturn (and I hope we do soon), we will all need to update our thinking and processes. The scrutiny to which we will be subjected is going to be intense.   Is this a bad thing? Not necessarily. However, we must each decide if we truly wish to operate in this environment and, if so, be prepared to change our thinking. How will you deal with this and move forward in your dairy business? Hopefully, this process will assist you to accomplish that task. I suggest you give it a try. I think you’ll be glad you did!

Back to the Future

These past two years have forced many producers to decide whether they are truly committed to being in the dairy industry long term. Our industry is no longer designed for those who are “faint of heart.”   Assuming you have decided to stay in the dairy industry and are not reading this from the sidelines, you definitely will need a plan going forward. Every new client that we work with at Success Strategies, Inc. goes through a challenging set of questions to help them set objectives and determine where, specifically, they want to be in three years, five years and in the long term. I call this the Discovery Process™ because it assists producers to do some soul searching about where they want to take their business, and perhaps just as important, it forces them to outline what their strengths and weaknesses really are.   What factors do you have going for you in your business? What items are presently working against you? What can you do about them? What options are available to you to overcome weaknesses or challenges?   As we complete this initial process, I believe that it is essential that we focus on being optimistic. Please note that I did not say to be naïve. Just be optimistic. The primary benefit I find from maintaining a sense of optimism is that it leads me to be more proactive in my decisions instead of being reactive. A sense of optimism will help to keep you moving forward. In 2003 (following 20 months of low milk prices), I gave each of my clients a placard entitled “The Light of Optimism” for Christmas as a potential source of encouragement. I am amazed at how many clients still have that gift in their offices.   Remember, the key is to keep making forward progress, even if it is in small increments. I get very concerned when people throw their hands up in frustration and give up. On the contrary, never let what you cannot do interfere with what you can. There is always something you can do. Instead of stating, “I can’t,” ask yourself if that is what you really want. If not, start thinking about what you can do. Maybe you could not cash flow these past two years, but you could do some other tasks. How about cutting some expenses to reduce your losses? How about building a margin in with Puts and Calls?   Additionally, the last 24 months has been a crucial time to keep your Loan-to-Value percentages on your herd loan and feed line within compliance. While I realize this has been difficult, it was not an impossible task. My clients verified that during the last 24 months, but, once again, I feel it is part of having a plan on everything your do… As my good friend and motivational speaker Les Brown says, “Wherever you are in life, you made an appointment to be there.”   To summarize, think about what you want for your business. Do you have a clearly defined plan for your operations? Be honest with yourself, and think about the following points:

  • Have you determined what you want to achieve?
  • Are you optimistic about your odds of getting there?
  • Are you taking all the necessary steps to reach your objectives?
  • Don’t worry about always having the right answer. Sometimes, it is more important to ask the right questions such as: “Given the current state of my business, what can I do to improve my results?”
  • Don’t forget to run the “What If” scenarios. These can be critical to your success.
  • Finally, if you need help, get it. Talk to your CPA, your banker and others who have had similar challenges. If I can help you, please let me know. My e-mail is john@success-strategies.com. Also, be watching for my new program in 2017 entitled Six Hours to Your Best Year Ever!

Start reviewing your available options today. There is no better time to start than the present moment. Think about it.     “Someone has to take responsibility. I will.”              Winston Churchill, Former Prime Minister of Great Britain

Are You Ready for Some Positive Change?

Do you ever feel like your operation needs some fresh thinking? I do. That’s precisely why I read so many different books and publications…to get great new ideas. It helps to build exciting new challenges into our daily activities. Maybe it’s time to change our thinking in the Dairy Industry, too!! Author Seth Godin, in his book The Big Moo, explained his thoughts on organizations. This can include your business, your bank, your vendors, and even your milk cooperative. He states: “There are two kinds of organizations. One kind likes to be on the cutting edge, to do what hasn’t been done before, to embrace the new. The other kind fears that, and holds back to allow someone else to go first. The United Way was facing tough times because they were afraid to change. The Saddleback Church in California was doing wonderfully (10,000 percent growth over several years) because they love to change. Companies that are good at being edgy will always find a way to thrive. The sure way to fail, it seems, is to attempt to compromise that affinity for edginess for the mass market. It’s harder than it looks. But what if your organization embraces its stuckness? What’s it going to take for you to start changing? What do you do when the market is moving away from you, not toward you? It seems to me that if you wait too long, it’ll be too late to do much of anything at all. Instead, recognize that change is coming, that the reality you operate in is dying out, and start practicing how to do the next big thing. Betting on change is always the safest bet available.” The lesson here is quite clear. We all need to be open to change. The outcome for businesses that refuse to change is equally obvious: They’re going to get crushed! I’d like to conclude with one of my favorite quotes from the Successories Corporation in Chicago, Illinois: “Our destiny is shaped by our thoughts and our actions. We cannot direct the wind but we can adjust the sails.” So, always be open to change and new ways to operate! Also, be sure to watch for my upcoming program in early 2017 entitled Six Hours to Your Best Year Ever!

Changing the Way We Look at Business

As you proceed through this year, it might be beneficial to change the way you approach your operation. No doubt, most producers will be excited about changing the way they look at their business, particularly following the blood shed on dairies the last two years. However, the first step to attaining different results will be to change the way we think. In their book entitled Change the Way you See Everything authors Kathryn Cramer and Hank Wasiak remind us that we need to “Leap out of bed with Your Vision Turned On! The difference between a person who is vitally engaged in life and someone who is merely going through the motions is a vision fueled by passion.” They go on to describe some of the “side effects” of this passion: Enthusiasm, Confidence, Optimism and Unbridled Conviction. Sounds like a very positive change after 2015-2016, doesn’t it? So, how do we get there? How do we increase our passion levels for the dairy business, given the “pain” inflicted these past two years? To start, I believe it is beneficial to review what one of my favorite economists of all time had to say. The Italian economist Vilfredo Pareto stated that: “Increased productivity comes from continually identifying areas where you can achieve 80% of your results from 20% of your efforts.” You know this as Pareto’s Law or the 80/20 Rule. Can this work on your dairy business? I believe so, but this is not an invitation to take shortcuts. Rather, it is a chance to identify those areas with the greatest payback for your efforts and to spend your time on those specific areas to produce the most optimal results! So what are those areas that will produce the most optimal results? Only you can answer that question. However, I am happy to provide you with a couple examples. I work with a client with whom I hold Management Team Meetings once per month. During a recent meeting, one of the partners mentioned to me, in private, that his brother was not spending as much time as he was “out with the cows.” While I recognized this, I believe it is important that we apply Pareto’s 80/20 Law here. The same partner who was not spending as much time with the dairy herd had just completed a negotiation with two of their vendors that provided them with a savings of $125,000! Could your operation have benefited from an extra $125,000 last year? That result appeared to me to be an excellent example of applying Pareto’s Law. A second example that comes to mind was with a Client whose son was also not spending as much time with the herd as his Dad would have liked. However, the son had managed, through the use of a combination of fixed price contracts, Put Options and several Call Options, to achieve an overall milk price of nearly $14/cwt for all of 2009. Was this smart? Absolutely! Can he pull this off every year? Not likely. However, his actions in 2009 provided their business with a substantial benefit at a crucial point. Management Guru Peter Drucker stated that “the business enterprise has two basic functions – marketing and innovation. The rest are all costs.” Managing this producer’s margin was an excellent example of how using innovation can provide your business with genuine benefits. What are the specific areas within which you need to focus more of your efforts? What activities will provide you with the largest return on your investment of time? Is it your milk marketing? How about your business planning and goals for this year? You are probably the one best suited to decide. However, I am confident that if you put your phone on “silent” for 60 minutes and give this issue some serious thought, you will come up with the right answer. As a result, you will likely hit your business objectives this year by focusing on your desired outcome. Give it a try. Remember, it’s your business!  “Wherever you see a successful business, someone once made a courageous decision.” Peter Drucker    

Are You Putting Your Business at Risk?

When I meet with my Clients, I often remember reading an article in Inc. magazine written by Adam Hanft that was entitled “The Risk of Doing Nothing.” I thought the article had some themes that were particularly fitting for the dairy industry. I realize that it is often more comfortable to do nothing when so many items look bleak.  However, doing nothing can often put you at greater risk than boldly moving forward with what looks like the correct option.  Look what happened to Montgomery Wards as they stood by and watched Wal-Mart become, not only the largest retailer around, but also one of the largest companies of any kind.  As I write this blog, I am comfortably seated at my favorite café owned by a company called The Roasterie in Kansas City, Missouri. While they appear to be thriving, think about the comparison between this company and Folgers, who also had a large operation here at one time. Wow! The key is to break the “Continuum of Paralysis.”  As Adam Hanft so accurately states, “No one decision to defer action ever looks all that monumental at the time.”  However, over time, look out!  The sad part is that indecision rarely punishes current management, but it often “mortgages the future.”  Thus, for those of you with another generation potentially coming into your business, can you do better for them? Here are some things to do to get through the current situation:  

  • Do not misinterpret the industry situation of the last two years as an excuse to keep your finger on the Hold Button.

 

  • Rather, look at your Costs/cwt, your Volume of milk produced, Labor Utilization, and how you might spread your Fixed Costs out even further.

 

  • Just as important – Ask yourself, “Is there a better way we could do this…?” Often, your Management Team can offer you some suggestions.  Recently, one of my clients made some simple changes in their feeding program and also changed the age at which their heifers were being bred.  These adjustments boosted production nearly five pounds per cow per day and reduced their heifer raising costs.  This has been very helpful to their bottom line!

 

  • Along that same line, be open to new ideas. We must overcome the ongoing temptation to think that it is more risky to try new ways of completing tasks than it is to keep everything unchanged.  In this dairy industry environment, doing nothing can get you run over!

 

  • Put together an ACTION AUDIT and see how well you stack up against the rest of the industry. Are you currently doing everything you can to stay competitive?  Are you taking the time to complete and measure the small tasks that can have a large impact on your operation?  This is not just about costs per cwt.  It is also about how your operation is faring in terms of Cows Milked per Hour, Labor Efficiency (cwt shipped/employee), Heifer Efficiency (e.g. age at first calving) and many other items.

 

  • One other thought as you compare yourself to the industry. You will likely notice that you are doing better than others in terms of costs/cwt in some areas and not as well as other producers on other items.  Sometimes your facility can restrain your performance in comparison to a new operation, but how are you doing compared to your results five years ago? Are you doing better or worse?

  To summarize, don’t just resist change.  Remember that the best time to plant an oak tree was 20 years ago, but the second best time is TODAY!  Make an appointment with greater levels of success.  As one of my favorite motivational speakers, Les Brown, said about making improvements in your business, “You gotta be hungry!”  Consider the possibilities of his statement as you continually strive for excellence. Remember, it’s your business!

BANKING ON RELATIONSHIPS

One of the most common problems faced by many business people today revolves around their ability to obtain the financing they need. This challenge becomes even more pronounced when we are faced with a tight lending environment. It also shows the importance of maintaining a solid relationship with your lender. Whenever someone gets turned down on a loan proposal, we have to review the facts and explore possible “whys”.

  • How do the historical numbers look? i.e. has your business been profitable in the past?
  • How reliable are the numbers in your financial reports to the bank? Are they CPA prepared?
  • What do your current cash flows look like? Have you completed some projections, and if so, do the projected trends look positive or negative? Even if they look soft in the interim, is there a projected turning point sometime in the future?
  • What are your plans for the next 12 months? In less detail, how about the next two to five years?

I’ve never seen a loan turned down without reasons. All loan officers have a dual and often difficult role to play. They are attempting to accommodate your need for loan funds, while protecting the assets (i.e. loaned money) of the bank. Most lenders are willing to provide you with their reasons for turning down a loan request. Let’s review common reasons for a loan request being denied and what to do in response.

  1. Weak financial history. Often this can be countered by a plan to implement changes. Can you suggest changes in your operation that make economic sense? “Insanity” has often been defined as “doing things the same way and expecting different results.” Make sure you are making changes to “turn the corner” and get back on the track to profitability.
  2. Lack of a clear plan. Do you have a defined plan and established goals for your dairy business?
  3. Maybe they are correct. This is a tough one, but if we cannot justify our investment in the proposed financing, perhaps we need to consider other options.

We each need to remember that a banking relationship, just like a good marriage, is a two way street. We need to always be showing improvement in our operating results, demonstrating we have a clearly defined plan with reliable historical numbers and sound cash flow projections. After you plan your work, then work your plan. Fine-tune your agenda as needed. At that point I believe lenders will be looking for you!

Redirecting Your Business Focus

Recently, I read a great article on business focus in the January 2017 issue of Inc. magazine entitled “Keep Your Head in the Clouds and Your Feet in the Mud.” While I found the title, in and of itself, interesting, I thought it would definitely be worthwhile reading this at length. It was authored by Gary Vaynerchuk, founder of Wine Library, whose book I had read several years ago. He started out by saying: “If you’re an entrepreneur who is struggling with average results, there’s a good chance you’re stuck in ‘the middle.’” Interesting, I thought, particularly with the average results we have been seeing in the dairy industry with its low milk prices during these past two years. He went on to explain: “By the middle, I mean you’re probably too focused on the minutiae, the 99 percent of the stuff you encounter every day that has nothing to do with what you want out of your business and is not part of the hard work it takes to get it.” Wow! This is true for so many of us that run our own businesses, including myself. I would like to suggest that we start to focus on the items that really matter, the reasons you are actually in business to begin with. Aside from providing for your family, what are your specific reasons? Do you want to provide consumers with the #1 beverage available? Do you want to develop the very best genetics in the marketplace? Is it your goal to successfully continue your ancestors’ dream farm? Whatever that objective is for you, this should be your primary focus today. As Vaynerchuk explains:   “The clouds are a metaphor for strategy. They’re the high end beliefs that are at the heart of everything you do, everything you want out of your business.” It’s easy to shift our focus away from these when we are in difficult times.   It should certainly not be whether the banks are going to start calling in their lines and loans since dairies have not been cash flowing with $13/cwt milk, even if you have been hearing such rumors. One of the best practices I have utilized over the past 19 years as an entrepreneur is to simply ask myself: Will this activity get me closer to by goal? This forces me to do two tasks. First, it helps me to consistently focus on my objectives for my business. Additionally, it reminds me that, in order to reach those objectives, I need to remain focused on the items that will guide me toward them. You probably know the Biblical reference that stated: “What got you out of Egypt is not necessarily what’s going to get you to the Promised Land.” It is the focus on your strategic initiatives and “Why” you want to reach them. If you know your “Why,” you will undoubtedly figure out the how of accomplishing these objectives. The “dirt” that Vaynerchuk describes refers to all the detailed items that have to be done to succeed. You know, within your expertise, the many things that you need to execute correctly. While these all need to be done by you or someone on your team, the problem lies with our inability to get above these tasks. If we are not careful, spending too much time on these activities can put you in a vulnerable position! We all need to look up occasionally and check out the macro-economic trends and what is happening in your marketplace. This is precisely why I hold regular Management Team Meetings with my Clients, to make certain that we periodically look at what is going on around us, in addition to how we are performing vs. our goals, and to check what we are truly focused on. This process should also include one other item. While having the answers can often be beneficial, remember that asking the right questions can often be even more powerful. Think about it. It’s your business!

Where are you now? Do you know where you are headed?

Let’s face it. This year and 2015 have both been tough financially! So, how are you faring these days? You know, recently I thought I was having a rough day when I completed four flights in two days and then six flights in four days… until I was sitting next to a lady who had recently experienced an “emergency landing.” Apparently, one of the jet’s engines had stopped functioning, all of which wasn’t leading to a very positive outcome…   So, just as with my bemoaning the numerous flights in one week, things are often a direct result of how we look at them. With that in mind, as part of a new program that I am presently developing entitled “6 Hours to Your Best Year Ever,” I am introducing a new self-evaluation tool entitled the “Know Your Score,” which you can use at your convenience and at no cost by using the following link:   http://knowyourscore.coach/scorecards/c36a14133f28f0d3edca51f685c161a4/surveys   As you take this evaluation tool, ask yourself two questions: 1.) What are my scores today? 2.) What do I want them to be in five years? As you find yourself struggling with the current negatives of our industry, please understand that you are not alone in these challenges. I understand how you are feeling. Every one of my Clients is feeling much the same right now. In fact, I’ve felt the same challenges almost every time I talk to one of them, but what I am finding is that if you remember that this, too, shall come to pass, it can really clear your thinking.   I recall the story about the professor who, on the first day of class, told his students that they could earn an A, B, C or F in his class. He outlined the requirements for each specific grade. Their assignment before tomorrow’s class was to simply decide which grade they wanted to receive and turn it in to him. They could move up (in grade) or out of the class, but if they stayed and skipped any of the required steps for a given grade, they would receive an F. Sounds just like real life, doesn’t it? What “grade” do you want to receive?   After you have determined where you currently are in your thinking and where you would like to go in the future, can we help you get to where you want to go? If you would like a follow-up call, please shoot me a quick e-mail at john@success-strategies.com, and we’ll schedule a 15 minute call. Know anyone else who can benefit from this tool? Please feel free to forward this to them with its link, or if you’d like, just share their e-mail with us and we will do it for you. Thanks!   My business coach Dan Sullivan, who developed the original Mindset model called the Optimum Maximizer™ said you should always talk yourself into a better future, not a worse one! Of course, that is the objective with this model. I hope you find it helpful.   “Success is not a matter of where you stand, but in what direction you are moving.” Quote on Excellence from the Successories™ Calendar

Measuring Up To Success

Recently, I was introduced to a concept by my Business Coach Dan Sullivan that I believe is very applicable to any business today. He stated:   “If you measure something, you can understand it. If you understand something, you can control it. If you can control something, you can improve it.”   Wow! It sounds so simple, but let’s explore this quote more deeply. We all know that it is important to take measure of many facets of your business operations. Yet, many of us, in spite of knowing this is true, still don’t do it. I am not certain why many people resist doing this, but, frankly, it’s the best way I know to make any type of improvement. For this reason, I have spent years putting together measurements of my Clients’ business results. Please allow me to provide you with several examples:   As a follow-up to completing Annual Cash Flow Budgets for my Clients each year, I also track their Actual vs. Budget results every month. Obviously, this is the measurement part. Understanding this information comes from the analysis we do whenever an item is “highlighted” for being more than 5% over our budget. One of my Clients calls these his “Amber Alerts,” because they point out the areas we need to focus on improving or, at a minimum, grasp a better understanding of why these items are over budget. Sometimes these cost over-runs are out of our control, but 95% of the time they can be controlled. Just understanding what is going on within your business provides you with an opportunity to control it, and, clearly, if you can control an item, you can also improve it.   My Management Team Meetings with Clients also measure their results compared to six months and 12 months ago. On a dairy operation, these are items such as Milk Production per cow per day, their Pregnancy Rate, Heat Detection Rate, Percent of the herd that is pregnant and many other items. These are the measurements. We can grasp a better understanding of these simply because we measured them vs. prior periods’ results. If we understand these items, we can understand why they are getting better or worse and gain better control over our outcomes. As I said before, if we can control something, we can improve it.   I also work with Clients who have fairly labor intensive businesses. In their case, because they can automate some tasks rather quickly, we measure their cash flow results, not only vs. their budget, but also on a “per hour billed” basis. Completing these measurements helps us understand what the results are, but also gives us a grasp of the trends in our expenses per hour billed. Once we understand these items, we can take steps to better control their bottom line, allowing us to also improve their results.   I hope you find these examples helpful. If I can assist you with your business in any way, please let me know. Be sure to watch for upcoming announcements of my new program entitled Six Hours to your Best Year Ever! available at www.success-strategies.com soon.