What a tumultuous year! The last twelve months in the dairy industry looked like a cross between two of Dr. Seuss’ children’s books. On the one hand, it parallels If I Ran the Circus with its irrational supply and demand, particularly on commodities that are plentiful in comparison with their current usage, yet, until recently, remained overpriced. On the other hand, our industry scenario seems to be replicating Stop That Ball with an economy that appears relatively lifeless, yet in other ways seems completely out of control when we look at the painful process of loan approvals and the dramatic changes in real estate values. Hopefully, things will become more normal again soon! However, just in case they are not, it may be a great time to re-examine your game plan and determine what your mode of action will be. Whenever I get into a situation like our current one, I like to check out what several of my favorite business authors have to say: Seth Godin in his book entitled, The Big Moo, advises us to “Stop Being Ordinary.” He suggests: “Embrace the Power of Storytelling to bring it all Together” – Be like Medtronic, a blue chip medical technology company, who, when their team needs some motivation, they bring in patients and ask them to talk about how a Medtronic product has changed or saved their life.   Rudy Giuliani, former mayor of New York City, shared the following suggestions in a presentation that I attended several years ago: 1.) “Have conviction and strong beliefs. Stand by what you know is right. Be an optimist. He shared the story of the legendary Coach Vince Lombardi, who, after his team was defeated, was asked by a younger coach how it felt to lose. Lombardi replied, “Son, I didn’t lose that game. I only ran out of time!” 2.) Be positive and always visualize a “hit.” Singles, not just home runs, help to win games, too. 3.) After reviewing what you know and anticipate, take action, and he added, “Remember: Courage does not equal the absence of fear. It is acting in spite of it.” 4.) Practice and rehearse. Have a plan in place to cover most things and even some of those you don’t normally think of. 5.) Remember, teamwork is key! Ask yourself, what are my weaknesses? Where do I need help? 6.) You have to communicate. Let people know what you are thinking. This holds for employees and your banker. They both need to know!   In summary, this is a time to build success. Be sure to keep things in perspective. Is the economy tough? Yes, however, interest rates are still low as I write this blog. As former Microsoft President Rick Belluzo stated, “Enjoy the opportunity to reinvent yourself. When I was displaced, I knew that it wouldn’t be the only hardship I’d face in my career. Rather that dread the future, I became eagerly excited. I looked forward to facing additional experiences that would require me to ‘reinvent’ myself.” This represents good advice for all of us.

For those of you who have ever been on a commercial airline flight in the United States, you are probably very familiar with this warning: “In the event of an unexpected decrease in cabin pressure, oxygen masks will drop from above your seat. If this happens, please place it over your mouth and nose. Be sure to secure your own oxygen mask before attempting to assist others.” Sound advice, isn’t it? Actually, the more I thought about this advice from the airlines, the more I decided that it also made a lot of sense for those of us in the dairy industry. In fact, it makes a great deal of sense for any business, including my own consulting firm. How can we assist others if we don’t have our own “oxygen mask” secured first? The “oxygen mask” I am alluding to is that set of clearly defined objectives you have established for your business for 2016 or, for that matter, any given year. You know what I am talking about – your 2016 Goals… If you haven’t set them yet, this would be the best time to do so. If you want to boost your ability to reach these objectives once you have set them, share them with your Team, including your key employees, veterinarian, breeder, nutritionist, banker, accountant and financial advisors. The magic of completing this task is that you will all be working to move your progress in the same direction. Further, these other participants will be better equipped to help you reach your objectives by optimizing their part of the overall plan. Remember to make these goals SMART – Specific, Measurable, Attainable, Relevant and Time-Based. Former actress and comedian Gilda Radner (from the “Saturday Night Live” show) once said, “When I was young, I always said I wanted to be someone. Now that I’m older, I wish I’d been more specific!” While, as usual, she was joking with her audience, there is also an immense amount of truth to her quote. Please allow me to provide you with a couple of examples:

• You should have a business goal centered on your financing needs for the year. Are your lines of credit large enough, especially if we continue to have a downturn this year and your business is growing? Now is always the best time to arrange for whatever you will need going forward. It shows that you are thinking ahead, and, besides, no banker likes to do another request in the middle of the year, especially if we are in the middle of a downturn.
• Regarding your dairy operation’s goals for the year, if you know what you want to specifically achieve in terms of reproduction, milk/cow, feed costs, and other items, it makes it a lot simpler to communicate this to your partners, employees, family & professionals. It also greatly improves the odds that these individuals will be better positioned to implement the tasks necessary to help you get there.

Our industry, like so many others, is facing great levels of change. In some areas, we are being forced to operate in totally unfamiliar territory. We cannot change that factor. However, regardless of what this year looks like, in the end you will definitely be better served if you are pursuing a defined set of objectives or goals within your business. Unlike their routing of flights and some other items, the airlines have finally suggested something that makes great sense when they recommended that you secure your own mask first. Take some time today to set your own Goals, so you will be assured of both a smoother & safer flight this year! I think you’ll be glad you did.

This is a question many people are asking. I believe it’s something we need to be looking at regularly. As far as when you should fix them, that depends on many factors.   *    Are you planning to stay with your current lender? Are there any Prepayment Penalties? They have committed to investors to pay a fixed rate on their funds. Thus, you will likewise be committed to the bank. If you pay a fixed rate loan off early, you may be subjected to a prepayment penalty.   *    Will you be increasing your loan amounts soon? Be certain that this doesn’t impact your rates. Often, they’ll set up fixed rates on portions of your loan at various maturities.   *    Where do you think interest rates are heading…UP or DOWN? Look at the leading indicators. Read the Economy section of The Wall Street Journal or check at www.WSJ.com. Read the Business section of your local newspaper. Look at Kiplinger’s or MONEY magazine. If the economy sounds like it is weakening, the Fed may step in and lower rates…to stimulate the economy. If it is showing signs of exuberance and growth, they might increase rates to slow the economy and reduce inflation.   *    What is the basis of your lender’s fixed rates? This matters because there is not always a perfect correlation between what the Federal Reserve Bank does to influence the PRIME RATE and what happens to other rates. It’s important to know if your floating or fixed rates are tied to the Prime Rate, LIBOR, or Treasury rates. Be sure to study the rates available to you before committing. If you don’t understand them, ask for an explanation from your banker, your accountant, or another financial advisor.   *    How tight is your budget? Interest rates you pay certainly can impact your bottom line results!!! This is true for any business that borrows money. 1)      If you are new in business or are carrying a lot of debt at present, you may benefit from fixing your interest rates. 2)      Just being certain of your interest being paid might help you sleep better at night. Each of us has a different temperament for these items! 3)      Ultimately, you’ll want to keep the bottom line positive – this is only one factor to watch!   *    Will you call all of these decisions perfectly correct? No one does. However, spend some time studying the movement of rates (trends) and talk with more experienced borrowers, your accountant, or lenders! As you study more and watch these trends, you’ll become better prepared to make decisions to increase your odds for success.

Do you ever feel frustrated with your level of accomplishment in business or in life? I believe we all do at one time or another. You know what, though, it doesn’t have to be that way at all. According to Dr. Kathryn Cramer and Hank Wasiak, coauthors of the book, Change the Way You See Everything Through Asset-Based Thinking. They state: “People from all walks of life (professionals in business, athletics, medicine and consulting, managers, mothers, fathers, teachers, journalists, administrators) suppress their current levels of excellence and achievement just by shifting, ever so slightly, the way they see everything.” Challenges on most dairy farms seem to arise on a regular basis, don’t they? Ever think what could be possible if we just focused our attention on:

1.   Opportunities rather than problems
2.    Strengths more than weaknesses
3.   What can be done instead of what can’t?

The authors suggest: “When you decrease your focus on what is wrong (deficit-based thinking) and increase your focus on what is right (asset-based thinking), you build enthusiasm and energy, strengthen relationships, and move people and productivity to the next level.”

1. Make a list of three to five things you have accomplished in the past week or so. Make a chart of these in one column. The authors do note: “Most of us did not receive a Nobel Prize yesterday, so don’t be concerned with the magnitude of your accomplishments. List those that stand out.”
2. Next, reflect on the personal talents, strengths, and skills you used in making those accomplishments happen. Jot those down next to each accomplishment.
3. Take a good, long look at your notes. This is your ABT profile. What patterns do you see? Think about how you can leverage this particular positive pattern of skills, talents and strengths – today, tomorrow, and next weekend! Do this reflection on a regular basis and you will be amazed at what you discover about yourself (We all have major blind spots when it comes to our own unique assets).

Authors Cramer and Wasiak conclude by stating, “You are what you feel – A study in the August 2002 issue of ‘Mayo Clinic Proceedings’ reported that people who expect misfortune and see the negative side of life (the DBT crowd) don’t live as long as those with a more optimistic view. Asset-Based Thinkers had fewer problems in daily activities, less pain and fewer emotional problems, and increased energy.” Can we afford not to clear our minds and give “Asset-Based Thinking” a chance at your dairy farm?

The number one question we all should be asking is, “Am I prepared?” What an amazing difference it can make to be just step ahead in the thought process on dealing with change. This was clearly stated by steel magnate Charles M. Schwab when he said: “Keeping a little ahead of conditions is one of the secrets of business…” With that in mind, I like to develop various “What If” scenarios with clients to better understand the impact of various anticipated changes.

• What if milk prices stay low next year? Will your operation be able to cash flow? Will you need to make any changes? If so, what will the expected impact of those changes be?
• What if feed prices increase even more? With the economy of countries like China starting to change, who knows what their effects might be? Do we have some potential substitute products available to us? If so, do we need to contract for them now? How will they effect our production and profits?
• What if you wanted to replace or remodel your milking barn? How will this change your bottom line results? Will the change pay for itself in terms of labor costs or by allowing you to add cows and more fully utilize your facilities?
• What if interest rates increase? How will that change affect your results? Should you be fixing at least some of your long-term interest rates, particularly on loans that you know will not be paid off in the short term?
• What if worker’s comp or other insurance soars up in price again? Just the inherent uncertainty of a post 9/11 world can impact these items. Are you positioned to absorb such a financial shock?

Often, when I bring up this type of question, people respond by saying, “I’m not sure that the financial information I have is perfect.” My response is that while that may be true, such uncertainty has always been the case. However, the sooner you get started on reviewing this financial information, the sooner you will be prepared to make more informed decisions. Our FINANCE MATTERS™ software should be available soon to assist with knowing your Costs/cwt and understanding your Break-Even levels. Futurists and authors Jim Taylor and Watts Wacker, in their book entitled The 500 Year Delta, contend that future success lies with those who can make sound decisions with limited information. The key is to outline all the potential outcomes for your various scenarios using the information that is available, taking into consideration the many business and political environmental forces that could affect your key decision factors. This includes not just the likely ones but the potentially unlikely ones as well! Then, develop a strategy to deal with those outcomes. Such planning will increase your awareness of the possible options, set your priorities for action and help you determine what steps you must take to achieve your long-term objectives. Philosopher Basil Walsh was right on target when he stated, “An intelligent plan is the first step to success. The man who plans knows where he is going, knows what progress he is making, and has a pretty good idea when he will arrive.” Giving full consideration to the question I asked in the first paragraph of this article and going through the process of “What If” questions listed above, along with others you might think of, will undoubtedly better prepare you for a more fulfilling and profitable future!