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.
Remember the song entitled “Don’t Worry, Be Happy”? Humorous? Yes, you couldn’t help but smile when you heard it! Wish you could do so? Yes. Realistic? Probably Not! Steve Chandler, in his book 100 Ways to Motivate Yourself, states, “Don’t worry. Or rather, don’t just worry. Let worry change into action. When you find yourself worrying about something, [as so many in the dairy industry are today (my addition)], ask yourself the action question, ‘What can I do about this right now?’ And then do something. Anything. Any small thing.” Most of us worry about lots of things. Why? We think it will get better if we do. WRONG!!!!!! Chandler also says, “But when we worry, we don’t worry a thing to death, we worry it to life. Our worrying makes the problem grow. And most of the time, we worry it into a grotesque kind of life, a kind of Frankenstein’s monster that frightens us beyond all reason.” He suggests we take four problems – 5 minutes each – No more than 20 minutes! Not too much time to commit! I discussed the following four problems with a client recently: * Upcoming Bank Meeting – – How could I better prepare for Friday morning? – What will my Loan Officer want to review/discuss? * Deadline Environmental Report – – What must be reported/measured? – Did I need help? If so, from whom? * A Growing Stack of Bills Facing Me – – Open and sort them. – Pay whom and by when? – Set a day(s) to do so… * Plans for my son at College – – What do you want for him? – What does he potentially want?
- Set date to outline plans.
- Set date to discuss this with his son, Bobby.
And all of this only took 20 minutes – WOW! * Fear cannot coexist with Action! * If you’re worried, take some Action Steps. * Ask yourself, “What small steps can I take NOW?” ** If you didn’t have a chance to use my 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, here is another opportunity for you to do so (for a limited time): 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? I hope you find it helpful!
I’d like to share with you a story of two Clients in two different industries, who were in two very unique situations but both needed financing. One of them gave the bank all the information they requested and awaited a response, while the other Client stated that, “If they can’t get this loan done in less than 10 days, just forget them! I’m moving on!” Well, that approach is OK if you have lots a time to burn, but really, does it make sense to meet and fill out forms for 10 banks for two weeks each, racing through five months of time, only to find out that you’ve burned bridges with all of them? Wouldn’t it make more sense to meet with three or four of your top banking candidates and make certain that they can complete the type of financing you desire? I think so. In fact, I find that if we hold discussions with several banks at the same time and provide each of them with the financial information they need, we can be much more efficient in our approach to the loan process. While it still may take four weeks to get to the point of signing loan documents, we can be much more effective in completing this task, simply because each of them will likely want the same information. What will they probably need?
- Three years of Financial Statements & Tax Returns for your business.
- A current Personal Financial Statement for each owner of the business.
- Cash Flow Projections for the current year, and possibly “in house” Interim Financial Statements if you are already part way through the current year when you apply.
- A potential Loan Structure you desire, as outlined in your Cash Flow Projections.
Once you have submitted all of this information, be patient, for two reasons. First, banks are under a lot of pressure from the Fed and the OCC, as well as other regulators, to make only the most optimal loans. Doing so will require them to scrutinize every loan prospect very closely. With this in mind, work with the loan officers as best you can. Understand that they have a lot of people to report to, and often, they are not the final approver on your loan proposal. Another reason to be patient is that your deal is most likely not the only one they have pending at the same time. They get paid to produce results, so give them a chance… Actually, is this all that different from ten years ago? Not really. With all of agriculture being subjected to much higher levels of volatility, the anxiety levels of both lenders and borrowers have climbed a great deal, as have our expectations. You may be thinking – Hey, I have survived the downturns of 2003, 2006, 2009 and now 2015-16 – I must be good. You may be correct, but the same rules still apply. Is your “Burn Rate” stronger or weaker than it was 10 years ago? Work patiently with the banks, as outlined above, and I’m confident that success will come your way, and probably long before five months have passed. If I can assist you with your business financing 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.
During the last 18 months, I’ve heard a lot of people listing all the things they can’t do:
- I can’t get my bank on board for the changes I want to make.
- I can’t get production where I want it to be.
- I can’t get my feed costs down.
I know that this period has been tough on both Cash Flow & Morale, but please allow me to offer a few suggestions:
- Whatever the subject, whether you think you can or think you cannot, you’re correct!
- Having said that, let’s shift our focus to what we can control.
What can we control???
- Our attitude. Legendary UCLA basketball coach John Wooden said it best – “Things turn out best for the people who make the best of the way things turn out.” Author Louis Mann said, “What happens to a man is less significant than what happens within him.”
- Our management impact. Are you surrounding yourself with the best advisors at this time? Your management team has a wealth of positive experience to offer you. They see the best and worst practices of other dairy operations. Take advantage of their availability and their knowledge.
- Cost controls. Have you reviewed every line item in your budget? High milk prices in years like 2014 can lead to increases in some expense areas beyond reasonable levels. Check your various costs and review your labor utilization.
- Develop a plan and meet with your banker. Having a plan in place is crucial! Develop a contingency plan to deal with potential pitfalls of the next 3 to 6 months. The industry is beginning to turn around and when it does, you must be prepared to capitalize on the next upturn!
- Business advisors George Ford and Gordon Lippitt summed it up best: “Some self-confronting questions: ‘Where do I want to be at any given time?’ ‘How am I going to get there?’ ‘What do I have to do to get myself from where I am to where I want to be?’ ‘What’s the first, small step I can take to get moving?’”
If you would like to complete a self check of your current thinking and even plan for better future thinking, just click on the following link http://success-strategies.com to reach our home page and take advantage of our new free tool “Know Your Score.” I hope you find it helpful!
The savings and loan debacle of the 1980’s changed forever how banks were required to document and monitor loans. 2008’s financial meltdown simply amplified this same effect.
Given the difficult state of the dairy industry, lenders might, in some situations, be taking longer to make their credit decisions. Is this truly a tough year? YES!!! Is it the end of the world? Hardly. Is your loan renewal taking longer than usual this year? Perhaps, but so are the renewals of many other producers. Do you feel like your lender is being tough on you? Welcome to the new world of dairy finance. I have seen some of the most extreme lender responses over this year, some that even supersede decisions made in the 20-month downturn of 2002 to 2003 or even 2009. Perhaps, these same lenders haven’t forgotten the implications of these past downturns. However, I have observed two distinct and sometimes extreme reactions from lenders during the past year. The best lenders have laid out specific guidelines for my clients and provided them with sufficient operating capital to keep their dairies running smoothly during this transition time. This has allowed them to continue daily operations without worrying about whether their lines of credit will be renewed and has also allowed them to maintain positive relationships with their vendors. This ability to maintain operations in an ongoing and positive manner can be crucial to the success of any business. On the other extreme, I have seen some lenders drag out the renewal process for so long that they have actually weakened the client even further. Then, when the bank finally did complete the renewal process, the restrictions and reporting requirements were so onerous that the clients barely had enough money or time available to run their business! Additionally, these same lenders acted as if they were doing their clients a favor by completing the renewal. Allowing for a herd loan with a 65% today loan-to-value (LTV) is not exactly my idea of “thinking outside the box.” Limiting this client to a level of 62% LTV on their herd loan, particularly in a year like this, was a clear demonstration that this lender was not a long-term player in the industry. In spite of this, we still need to move forward in a positive manner. As a dairy producer, what should you do now? How can you position yourself to survive this extended downturn in milk prices?
- Be certain that all of your loan covenants and reporting requirements are up to date.
- Maximize your overall results as much as possible. If you are not sure how to accomplish this task, call on someone who does. This is an excellent time to visit with your certified public accountant, financial adviser or another lender. Try asking the potential new bank(s) what they might be able to do for you in your current situation.
- Don’t lose your “vision” for the future. Define clearly what you want going forward and then maintain your focus in the future. Review your goals and set new ones regularly.
- Learn from life’s lessons (failures) and move forward without dwelling on them. Instead, make a list of what items you should consider changing and then discuss them with others to be certain that it makes sense. Frank McKinney, in his book, Make It Big! tells readers to, “Do your job, do it well and do it every day.” This is sound advice for each and every one of us, especially in tough financial times.
- Finally, be sure to enjoy the process. One of the best ways to accomplish this step is to adjust our attitude by following the advice of George Bernard Shaw, who said, “The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can’t find them, make them.”
Please join me in following his advice. You’ll be glad you did!
Recently, I was listening to an old tape of mine that included an interview with former Notre Dame football coach Lou Holtz. In that interview, he was asked how he motivated his players to win so often. His reply was, “I don’t ask the players if they want to win. I ask them if they can live with losing, because if they can, that’s exactly what they’ll get because it’s so much easier to have.” I thought to myself, “Wow! Isn’t that exactly what we are facing in the dairy industry almost every year?” In recent discussions with other industry colleagues, one of them commented that it used to seem like one out of every three years was a real financial challenge for dairy producers. However, in the other two of the three years, a producer could regain his financial position. We then recalled the impact of low milk prices in 2006, 2009 and 2015-16, along with high feed prices in 2008 and 2011-2015. What Coach Holtz was saying is that we need to focus on winning. Considering the current and future trends in the U.S. dairy industry, including banks being tighter than ever, it is clearly time to sharpen our focus. How does this impact you as a producer? Unless you are in the process of “playing your last game,” you will definitely want to plan on sharpening your tools. Consider visiting my website at www.success-strategies.com to review the tools available there to help you develop a bigger future. As I’ve written previously, start to observe the trends. Are you using them to your advantage or do you find yourself fighting them? Do you have a solid strategic plan in place and are you using CPA prepared Financial Statements to regularly measure the impact of your labor efficiency, your changes in herd size, and your other cost cutting measures? Do you have a marketing plan in place for most of your milk? When milk prices are higher, as they are trending today, we should attempt to reduce our debt levels, because, as I explained above, we never know when the next downturn might be coming. Are you currently starting to do so? Will you be prepared when the next downturn arrives? Develop a plan today that allows you to get beyond just producing milk and allows you to work smarter, not just harder. If I can help you as you think about developing a brighter future, please let me know by e-mailing me at john@success-strategies.com. Most importantly, please set aside some time to consider our industry trends. What’s next? It’s your move.
“We have forty million reasons for failure, but not a single excuse.”
Rudyard Kipling
At a Leadership Conference at Duke University several years ago, I enjoyed a keynote address given by Duke University’s head basketball coach Mike Krzyzewski entitled “Building a World Class Team.” His message centered on his experiences developing the USA Basketball Team that competed in the Summer Olympics. He also outlined what he felt are the primary keys to positive leadership and sound teamwork. Perhaps, you will find these helpful as you develop your internal management team and build relationships with other professionals you work with. The attributes he described include:
- No Arrogance – He is dealing with a team consisting of professional NBA players, some earning up to $10 million per year. Are there some egos involved here? They have learned to put the team first and themselves second. This is no small task, but it can be accomplished in your operation, too, by helping your management team to share your vision for success and put their individual egos behind your team’s progress.
- Collective Responsibility – Simply stated, we win together and lose together. Is the loss of a game the responsibility of the player who missed the last second shot from 20 feet out? I don’t think so. Collectively, if we had played better throughout the entire game, maybe we would not have been under such pressure at the end. The same holds true for your business. When your milk flow is down, don’t blame the Nutritionist. Maybe we should have watched the breeding program closer to ensure better heat detection and more pregnancies, resulting in more fresh cows.
- Work Together to Get Better – Remember, in a great team setting, I don’t lose if you win at whatever role you play. We both win! Life is not a “zero-sum” game, as many of us have been told in the corporate world. Rather it is the summation of a series of win-win situations through which we grow. We need to work together to get better collectively.
- Confront Underperformers – There are so many examples in our world where we attempt to “equalize” everyone’s results, especially today with our “entitlement” society. I need not single out any sector or institution, because you already know what I’m talking about. As I said above, work together to get better & cultivate excellence.
In Part II, coming in my September 30th blog, I will continue with the final five points.
Continuing from my September 15th post, “Building a World Class Team! – Part I:
- Teach Your Legacy to New Talent – We can all learn from others. Everyone’s experiences are valuable, so why not make it a point to teach the younger “players” in your organization? Why force others on your team to learn by making the same mistakes you’ve already experienced? Pass your experience on!
- Create a Vision – Set goals for your Team and tell them what’s in it for them. For Coach K, it has been to win multiple gold medals for the United States. For you it might be to increase production per cow to a certain level or to reduce the average days open in your herd and shorten your calving interval. You decide. You might be surprised how interested your employees are in helping you reach your goals. A lot of people enjoy working for someone else. Thank goodness, because we certainly need good employees. They simply want to be aware of what your vision is for the business, because they cannot help you achieve a goal you do not have…
- Be Worthy to Win – Work hard and play by the rules, but play to win! When you do reach your objectives, be sure to share the success with your team. You probably could not have done it without them. I know that’s been true with my Team at Success Strategies.
- Use the Power of Words – When Coach K autographed his book for me, he stated, “Always believe in the ‘Power of Words.’” This can be a word of encouragement or, as he shared in his book Beyond Basketball, it might be as simple as stating “I believe in you” when you are interacting with a teammate. Words can also be a powerful visualization tool for people. Be sure to use them wisely.
- Have Passion! – Be excited about what you do. Whether you’re an owner, milker, herdsman or Cooperative Board Member, play your role to the fullest extent possible. My dictionary defines Passion as “Great enthusiasm.” Coach K described it as “…extreme emotion. When you are passionate, you always have your destination in sight and are not distracted by obstacles.” However you define it, be sure to demonstrate it on a daily basis as part of your success routine. I am confident that you will be glad you did!
Since early 2015, the dairy industry has been a difficult place to operate. Despite feed costs dropping considerably these past two years, the decrease in this expense area pales in comparison to the precipitous drop we have seen in milk prices since the end of 2014. Occasionally, I have had a Client remind me just how tough it is out there right now, after which I remind them that I not only analyzed their cash flow numbers this month, I also saw similar results at numerous other operations. Believe me: I do understand how difficult it has been for all producers. It has been brutal. I’ve been asked to compare this 2015-2016 time period to the calamity of 2009. Frankly, 2009 was simply devastating for many producers, but the last 20 months have been like “dying a death of 1,000 blades.” The pain has just gone on far too long. I recently read a fabulous article by New York Times best selling author Brendon Burchard (visit www.brendon.com). Whenever I get worn down by events, I love to read some of his work or listen to one of his presentations. In this particular article, he discussed how we can deal with adversity when it strikes and outlined five major points:
- “Have confidence.” – He goes on to explain that this is a natural outgrowth of believing that you can overcome the difficulty you are facing. Becoming negative will do nothing but lead you into depression, so simply remember that you can, indeed, figure things out.
- “Keep perspective.” – Regardless of how difficult things may seem, it is quite likely someone in the past has faced the same problem. If others have overcome this, you can too. He also reminds us that each of us has survived hardship before, and we can do it again.
- “Schedule Action.” – A far superior course to waiting to see what happens would be to make certain that you schedule specific actions to deal with your problem. Set action steps you can take each and every day to handle this. Do not, under any circumstances, delay action. Avoiding actions will only make things worse.
- “Ask for help.” – Believe me. In nearly every one of the financial turnarounds with which I have been involved, I wished the Client had come to me for assistance sooner. It amazes me how many times during the past 18 years of consulting I have found myself saying, “ Boy, I wish they had gotten me involved six months ago…” As my business coach Dan Sullivan says, “All progress begins with telling the truth.” In other words, face reality and openly discuss your challenge with someone who has been there before and who can help you.
- “Honor the struggle.” – Brendon explains that this represents a crucial element to having success in life. Sometimes we have to face adversity because we simply cannot control everything. Just accept that and guard your attitude.
I hope you find Brendon’s thoughts and my application of them to our industry helpful. And, please remember: Your attitude determines you altitude! Harvey Mackay, Best Selling Author & Speaker
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