Building Your Business Confidence

Have you ever had a time in your life when you didn’t necessarily feel like your confidence was as high as you’d like it to be? I have. In fact, I think we all have some times like this, especially when things around us are not going as smoothly as we had planned for them to go…

It’s hard to feel very confident when industry events put you in a position of losing money regularly. Unfortunately, negative financial returns can cause us to start asking ourselves some tough questions: “What am I doing wrong? How long can I hold on, given my losses and my current equity levels?”

I am sure you’ve heard the age old advice: “Be careful what you ask for. You just might get it.” With that in mind, let’s shift our focus to a much more proactive approach, because these negative questions can, indeed, take you to some very disappointing and depressing results. I have had the honor of being directly involved in the financial turn-around of numerous businesses during the past 19 years. However, in each of these circumstances, I felt it would be beneficial, rather than focus on how long this Client could “hang on,” to shift our attention to a far more proactive direction.

While the “dangers” of their financial situation were always in the back of my mind, I believed their business turn-around would require us to correct their course and get back on track. Oh, wait a minute. Getting back on course would require us to know what our destination actually was. It would require us asking: “What’s next? What do we want to achieve? What do we need to do in order to get there?”

My advice has always been: Slow down, Think & Plan. Remember, if this was easy, everyone would do it. However, it isn’t always easy, and so, people don’t do it. We all like shortcuts, but don’t fall into that trap on this task. I want you to be different. I want you to do better. I want you to succeed!

Rather than focusing on what can go wrong or how long you can hang on, focus on something totally different – what you want for your outcome! Following this strategy has served me well in these turn-around situations. I’ve seen businesses that lost $2.5 million one year turn a profit of $39,000 the next year. Was that phenomenal, in and of itself? Probably not, but even their banker had to admit that there was some hope going forward, which allowed them to work with us to get the business refinanced. They did go on to turn larger profits in future years, and this was a much better outcome for all those concerned, including the lender, as we moved forward.

What to do?

  1.  Set your Goal.
  2.  Know “Why” you want to reach this objective.
  3.  Lay out the necessary steps to achieve this.
  4.  Put dates for each of these action steps.
  5.  Take Action and continually move forward.

If you follow this process, I assure you, it will build your confidence and prepare you to discuss these steps with your lender, simply because it will equip you with answers to the questions that she will be asking. What do you want to achieve, why do you want to do this, and what are the actions necessary to accomplish this? With the answers to these questions in front of her, we can both be more confident she will be better prepared to help you.

If you would like some assistance with this process, I offer you the following. On August 1, 2017, our redesigned website at Success Strategies, Inc. will be completed, so take a look at a new video series we call The Strategic Gameplan Series, which will be listed under our Financial Techniques at www.success-strategies.com. Check it out. It may provide you with the foundation you need for an entirely new game plan.

 

The More it Changes, the More It Stays the Same…

Recently at the Western Dairy Management Conference in Reno, Nevada, we heard an excellent presentation by Mike Lormore, Director, Cattle & Equine Technical Services at Zoetis, regarding the various profitability variables all producers contend with in their daily operations. The presentation, entitled “What Drives Financial Success on a Dairy?” was based upon extensive research with Ag Star, a leading dairy lender in the upper Midwest.   I believe this presentation was exactly on target with what I have seen in my consulting work during the past 19 years. While there are many profitability variables to contend with, and this research does not suggest that ignoring one of the lower correlated variables would ever be a good idea, the top three are all ones that I have had the opportunity to deal with in each and every financial turn-around situation. They are the ECM level of the dairy operation, its 21-Day Pregnancy Rate and its heifer survival rate.   Let’s explore why these are the top factors:

  • Energy Corrected Milk per cow per day – This is fairly basic. Most dairies get paid for the amount of milk they ship to their creamery, whether it is higher in components or simply greater in milk flow quantity. As long as they are keeping feed costs and other expenses in line, the higher ECM herds will tend to be more profitable. Now, before you write me to tell me about the exception you found to this rule, please remember that we can always find exceptions to every rule, but this rule holds for most herds. Somatic Cell Count is also a factor here – think milk bonuses! Creameries only give these financial incentives for lower SCC.
  • 21-Day Pregnancy Rate (or risk) – I have seen this in so many difficult financial situations. Low Pregnancy Rates equal financial challenges ahead. Simply stated, a higher pregnancy rate leads to more pregnant cows, which leads to more fresh cows, which then leads to more milk, which certainly helps to pay more bills, assuming all other factors are consistent within a given dairy business. More ECM, as outlined in #1 above, is more profitable. For most dairies, this higher ECM only comes via more fresh cows, which is a direct result of getting cows pregnant sooner. I have Clients who regularly push a 30% PR, and their higher PR leads to more fresh cows and higher levels of ECM.
  • Heifer Survival Rate – It is incredible to me how many operations that have financial challenges ignore their heifer survival rates. Do so at your own risk. Keeping more heifers alive is like putting money in the bank. Often, I hear that selling heifers is the last step before the death of a dairy… I say, not so fast. Selling heifers, if it is part of your regular financial plan (and not a “fire sale…”), can generate some nice cash flow, which, if you sell them as fresh two year olds allows you to be taxed only at Capital Gains rates (and you can keep their heifer calves, too, adding more to the value of your herd!).

These are just the top points from Mike’s excellent presentation. However, if focus on your level of ECM, your 21-day Pregnancy Rate and your Heifer Survival Rate, your profits will not only increase, but many of your related variables will also improve.   Remember, as I previously stated in my February 28, 2017 blog, and as presented by Dan Sullivan, Founder of The Strategic Coach:   “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.”   I hope you find these discussion points 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.

In Defense of the “Mean” Vendor

I recently had a very interesting conversation with a producer. After asking him how things were going, he replied, “Man, these feed companies are really getting pushy. They expect me to be current every month.” I thought to myself, “Oh really… so does Wal-Mart.” I am not making light of the fact that the dairy industry has had a tough 2015-2017, or, for that matter, that all industries have their moments when cash flow is tight. However, the vendors that he was referring to had been extending him as much credit as they possibly could these past 27 months. However, they were running into two big issues: 1.) Their own cash flow was being pinched. 2.) Their lenders were pressuring them to clean up their Accounts Receivable. We have been through an interesting evolution. 40 years ago, supposedly no dairy ever made any money… Yet, they still were able to pay for their herd, their feed & operating expenses, provide owners with a living and an eventual retirement. 20 years ago, our markets changed to a global outreach, putting additional pressure on our revenues as we attempted to compete more with the entire world. Costs increased but at a fairly reasonable pace. However, the last 10 years, particularly during 2008-2009, the global swings have been wild! Despite assurances from the Federal Reserve Board that we have only minimal levels of inflation, almost all fixed and variable costs have climbed dramatically, pushing our break-even price levels to all time highs. Often, these were even pushed above a reasonable level. Suddenly, more businesses, particularly dairies, started to fail financially or, at best, began to liquidate. As a result, some vendors, whether secured or unsecured, received far less than what was owed to them. Not only did this crimp their margins, but the legal fees and other costs associated with collections became overwhelming. Even if they collect the 18% interest they often charge on “past due” balances, does that cover the cost of their financial manager or legal fees? I doubt it. Hopefully, this will provide you with some perspective the next time you hear about a “vendor coming down on one of your neighbors.” Remember, most vendors are in this game for the long haul (and those who aren’t will sort themselves out…), but they can’t very well serve your needs if they aren’t around any more. Think about it.

Building a World Class Team! – Part I

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:  

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Building a World Class Team! – Part II

Continuing from my September 15th post, “Building a World Class Team! – Part I:

  1. 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!
  2. 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…
  3. 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.
  4. 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.
  5. 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!

   

Dealing with Adversity!

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

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!