There is an epidemic going around America today. Thousands of people have a genuine challenge with simply making a decision.

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.

I think you’ll agree that Albert Einstein was a very intelligent person. However, as the scientist who developed the Theory of Relativity, most of us would not have looked to him for advice in the area of strategic management or life philosophy. While that may, for the most part, be a reasonable assumption, I’d like to review one of his quotes because I believe it contains some very powerful advice for us today. “The thinking that has brought us this far has created some problems that this thinking can’t solve.” What was he talking about when he made this statement? I believe he was talking about a situation that was quite similar to what some people in the dairy industry are facing today. Doesn’t this fit the scenario of a producer who has fallen behind on accounts payable or other items this year? Whether this was caused by only low milk prices, whether it is the direct result of poor decisions being made or whether it occurred due to bad timing on the part of the dairyman, the situation still needs to be addressed and corrected. Einstein’s quote fits the business that got behind on Accounts Payable, but it is also appropriate for the person who has been historically successful but has been blindsided by lower milk prices. If you (or someone you know) are facing a situation similar to this, take some comfort that you are not alone. There are others who also have gotten behind during these past few months. Nevertheless, these problems still need to be corrected. Changing how you address this challenge can really help. First, start by communicating with the vendors to whom you owe the money. Most of them are willing to work with you if you express interest in remedying the problem. Realizing this will take some time, work out a plan you are comfortable with and stick with it. Not fulfilling your agreed terms and conditions will only hurt you and your vendor over the long term because it can damage your future credibility. Finally, remember that you didn’t get into this situation overnight. Thus, it is doubtful that you’ll correct it in two or three months. Stay positive and use some creativity to reach a reasonable solution. Once you have reached an agreement, start looking for other new ways of thinking that may assist you going forward:

• Remember to spread those fixed costs over as many producing units as possible. In other words, always try to maximize the use of your facility to spread your fixed costs as much as possible.
• Always strive to minimize variable costs where possible as long as it does not impact the productivity or profitability of your dairy herd. Always know your costs/cwt.
• Be open to new ideas, and ask yourself, “How can we attain this goal?” When you seek the correct answer, operating under the assumption you will reach it, your mind will become amazingly preoccupied with finding a solution.

As I have said before, I believe you will be glad you did!