Entering a New Game!

Welcome to a new year, a fresh season and a clean slate – all with the makings of a positive start. With this new beginning, we all get a clean score card without any pluses or minuses. The scoreboard simply has all zeros. Unfortunately, this state won’t last long.

Take a quick look at your results for last year, and figure out what went well and what areas need to be improved. Are you prepared? I realize this can be a difficult question, but what have you done to prepare for this year? Have you set new Goals and developed a Plan for reaching them? This process can be challenging, but it definitely is needed in every business (including mine). Here is a list of questions designed to assist you with this preparation process:

  • Do you know what you want to accomplish this year? Share these objectives with your Team.
  • Have you set specific goals for items that have a direct impact on your efficiency? Written goals will keep you consistently focused on your target.
  • Do you have an established system in place for measuring your results on a regular basis versus just waiting until year end to see how it all works out?
  • Take the time to establish profitability goals on a monthly basis. Do you measure your margins monthly?
  • The best thing you can do is to measure your outcomes versus your plan regularly. There is no better way to know whether or not you are on track!
  • Do you have established Team Accountability measurements in place? These should be set with your employees and your outside professionals. People do not rise to low expectations, but, in all cases, it always helps to know what your expectations (Goals) really are.
  • Do you have a system in place to measure these results throughout the years? With my Clients, I use a scheduled set of Management Team Meetings with them, their key employees and other professionals to track our results throughout the year.
  • Finally, as the saying goes, “Plan your work, and work your plan.” Having a plan in place will dramatically increase the odds that you are more successful this year. Using this tool as a guideline for what items you need to focus on improving will serve you well as you proceed forward.

Following a solid plan based upon the points listed above and your business’ unique aspects, and then measuring your monthly results against an established plan, will get you closer to your objectives. Best wishes for a successful year!

Busy Earning a Living…!

Do you ever go through a period of time when, no matter how much work you finish, you just cannot seem to catch up, leave alone get ahead? I know I have had this feeling at times. Maybe it’s just part of being caught up in the never ending race called Corporate America, yet even today I find myself getting caught up in this “race,” and I don’t actually work in that arena anymore…

I recently talked with a friend who just could not seem to get everything done. In fact, I talked to him several times over a period of three days. Each time that I did, he sounded like he was further behind. No, it wasn’t because he had talked to me those times. I believe it was because he was suffering from what business author Mark McCormack described as “working too hard earning a living, to really make any money.”

He was so focused on trying to get everything done, that he had never stopped long enough to determine what items on his lengthy list were most important. In fact, did I say he had a list? Perhaps in his mind he did, but he killed his own efficiency by failing to take several key steps.

First, he never stopped long enough to literally make a list of the items he needed to complete. Additionally, he did not take a moment to prioritize them. I believe this is what Stephen Covey referred to as “beginning with the end in mind.” He needed to decide what he wanted to accomplish and then prioritize the tasks that would get him closer to those specific goals.

What? Who has time for this, you ask? I would suggest that the process of making a list could end up saving you a significant amount of time. Making a list and determining what is most important, what should be second, and so on would likely save you a considerable amount of time. Who knows? You might even find some synchronization of steps where you and your colleagues can gain some efficiency by working together…

 My advice is that when you get this “busy,” you need a road map planned out more than ever. Most people don’t plan to fail. They simply fail to plan and then lose their focus. I suggest you give it a try, because as famous investor Warren Buffet says of such times, “It’s only when the tide goes out that you find out who’s not wearing swimming trunks.”

“Building a World Class Team!”

A few years ago, I attended a Leadership Conference at Duke University and was fortunate to hear a keynote address delivered by Duke’s Head Basketball Coach Mike Krzyzewski entitled “Building a World Class Team.” His message centered around his experiences developing the USA Basketball Team that competed in the 2008 Summer Olympics in Beijing, China. 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 – Now remember, he was dealing with a team consisting of professional NBA players, some of whom are earning up to $10 Million per year. Are there some egos involved here? Absolutely, yet, 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 & 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. Rather, it is the summation of a series of win-win situations wherein we grow. We need to work together to get better collectively.

4.)    Confront Under-Performers – There are so many examples in our society where we attempt to “equalize” everyone’s results, so we “feel better” about ourselves. 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.

5.)    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!

6.)    Create a Vision – Set Goals for your Team and tell them what’s in it for them. For Coach K, it was to win a Gold Medal 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 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…

7.)    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.

8.)    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.

9.)    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 passion, be sure to demonstrate it on a daily basis as part of your success routine. I am sure you will have no regrets!

Going for the First Down!

Not long ago, I had a Client who informed me of their desire to acquire more land. I asked them if they were ready for it. “Of course we are!” was their immediate response. “Are you sure?” I asked. “Absolutely! No question about it,” they replied, “and it will only cost us $1,000,000 to buy it.”

I then asked them if they were ready to pay $350,000 in the form of a down payment. Of course, they wanted to borrow the whole $1,000,000 purchase price. Unfortunately, that was not an option, since they did not have enough equity built up in their other property. As a result, their bank would require them to front the 35% down payment, allowing them to only borrow $650,000 of the total price. 

Needless to say, they were not thrilled with this concept of having to come up with the first 35% and naturally asked how they could do that. I suggested some budget trimming and, more significantly, establishing a plan to reach the $350,000 milestone. There were several items that I suggested they could use for this saving plan.

On their dairy site, I suggested they save the cash from the sale of bull calves and all cull cows, or at least as much as possible. “Whoa, but that’s our spending money,” they exclaimed. “Yes, and most people who buy homes and other real estate also save their spending money,” was my response. 

I also suggested that they take any miscellaneous revenue, as well as any government program payments they received and put them away. This amounted to at least $165,000 per year on their dairy operation, beef ranch and cropping operations. While I realize that this would require some sacrifice on their part, I also knew that they would not have any regrets if they actually reached their goal. 

Business success, as well as life in general, is a series of tradeoffs. There’s no such thing as a “free lunch,” but that does not mean you cannot achieve your objectives if you work toward them. Sometimes that requires difficult sacrifices, but I happen to be of the opinion that these are the price we have to pay to achieve what we’d like to. 

I realize that saving money in our country seems to have gone out of style. We need look no further than our own federal government for a perfect example of this. I’d elaborate on that point, but it would require more text than I can include in a blog post. 

Ironically, this Client opted not to save their funds and make any more land acquisitions. I guess they felt it was too much of a sacrifice. However, after I suggested this to another Client, they started right away and in nine months had saved enough to add a new maternity area and transition barn for their fresh cows. As a result, their milk production is up by four pounds per cow per day. Their reward will continue indefinitely. 

That sounds like a solid return for their sacrifice! If you would like to learn more about ways to save money, either in your business or personally, check out my website at www.success-strategies.com or take a look at my latest book Saving for a Sunny Day at https://www.createspace.com/4588708. I hope you find it helpful to you!

What is Your Level of Commitment?

Recently, I have held discussions with two different producers about their level of commitment. One suggested that he had to be insane to tolerate the volatility of the dairy industry with its highs and lows in milk prices and feed costs the past five years. Right now, he is faced with having to buy springers each month… On the other hand, the second dairyman said he could not imagine doing anything else but being a dairy producer. What is the difference between their two outlooks? I believe that the primary difference revolves around their level of commitment.

In their book Great by Choice – Uncertainty, Chaos and Luck – Why Some Thrive Despite Them All, authors Jim Collins (who also wrote Built to Last and Good to Great) and Morten T. Hansen (author of Collaboration) talk a great deal about the roles of Resilience, Skills, Commitment to Preparation & Luck, and just how these factors can all play a role in the success or failure of your business. They tell the story of Malcolm Daly, a mountain climber who survived a horrible fall and his ensuing rescue from the side of Thunder Mountain in Alaska, just a few feet below its summit. “Malcolm Daly had been lucky enough to survive the fall, but he also had to be strong, skilled and resilient before the 44 hours of peril after his two-hundred-foot fall.”

They go on to say that “Luck favors the persistent, but you can only persist if you survive.” So, how do we go about surviving and to an even greater degree, thriving?

1.)    Start with a plan. Knowing what you want to accomplish, your target date and what steps you will take to get there are necessary ingredients for reaching your objectives. In an interview on DairyLine Radio, I previously stated that the future belongs to those who have a clearly defined plan. Whether you are driving your pickup truck, choosing a spouse or holding a discussion with your banker about expanding your business, you will always be better off with a plan.

2.)    Develop some resilience. No one ever said it would be easy to reach your goals in business and in life. However, that doesn’t provide us with a license to walk away, just because it may tough. When the going gets tough, the tough get going!

3.)    Obtain the skills you need to reach your objectives. It may cost some money, but it is far less expensive than facing a bankruptcy. I have been consulting for sixteen years and served as a commercial loan officer for seven years before that, but I still don’t know everything I need to know to succeed. I use a business coach, too.

4.)    Be prepared. As Jim Collins and Morten Hansen state in their book, “There’s an adage that says, ‘Better to be lucky than good.’ And it’s perhaps true – for those who seek to be only good, not much better than average, creating nothing exceptional. But our research brings us to an entirely opposite conclusion for those who aspire to more: it’s far better to be great than lucky.”

5.)    Finally, work hard to stay on course with your plan and always know where you are with respect to that plan. There is no alternative, other than to be like the warehouse worker, who, when asked how long he had worked at his current job, replied, “Ever since they threatened to fire me…” Staying on course with your plan will lend itself to far superior results.

To summarize, what’s your level of commitment? When challenges arise, will you be prepared? If having a plan to succeed in your business ever became a crime, would you be “guilty as charged?” If I can help you as you think about developing a bigger and better future, please let me know. Meanwhile, take a minute to go our home page and visit our free Success Tips section. You may find just what you are looking for!

Watching Out for Fair Weather Lenders!

Recently, I heard about a couple of banks who were anxious to start lending to dairy operations again. This seems odd, yet fitting, since they both could be described as “Fair Weather Lenders,” who give you an umbrella when the sun is shining and take it away as soon as it starts raining. They were both lenders who had clearly exited the industry during the past three years. In fact, in one bank’s case, they had inflicted lot of “pain” on their borrowers by making changes in their lending terms which, while they may have been beneficial over the long term, certainly were next to impossible to meet in the short term.

As a result, many producers were faced with lower herd values and tighter advance rates against their herd and feed assets, forcing them to be out of compliance. Then came the heartless “workout guys” with their weekly demands for additional reporting and a “plan” for the borrower’s exit strategy, either from the bank or, if necessary, from the dairy industry. When the “Goon Squads” were done with most borrowers in these situations, they were more than happy to leave this lending institution behind and go elsewhere.

The problem with “Fair Weather Lenders” is that, when you need them the most, they won’t be there for you. On the contrary, they will tighten the terms of your current agreement, either by bank-wide fiat or at your next loan renewal or extension. Rather than “riding through the storm” with you, they start making additional demands of you when you can least afford to be without credit. As a result, you get “painted into a corner” with very few options to fall back on. 

If you get approached by marketing people or loan officers from this type of bank, they will be quick to point out that their bank’s prior decision to exit the dairy industry (or any industry, for that matter) was not theirs. Rather, it was mandated from senior officials of the bank, based upon their stock’s performance, shareholder value, trends in the industry or who knows what. All of that may be true, but what is to stop this same thing from happening again during the next industry downturn?

Management guru Peter Drucker, in his book entitled The Daily Drucker stated, “Character is not something one can fool people about… They may forgive a person for a great deal: incompetence, ignorance, insecurity, or bad manners. But they will not forgive a lack of integrity in that person.” Blaming the “people upstairs” is not a very good example of either integrity or positive leadership. I want to know that my Loan Officer is going to be there for me when I need his or her assistance.

What’s the best response to have ready when the Fair Weather Lenders come calling? I suggest that you ask them how many dairy operations they “shut down” from 2009-2013. Also, you can ask them if you can talk to some of their borrowers who they stayed with during the same downturn. If they can’t or won’t answer those two questions for you, your time and efforts would definitely be better spent on managing your operation, because you have probably just met a Fair Weather Lender!

If you would like to learn more about building your banking relationships, check out the section entitled “Help for Dairy Farmers – Dairy Farm Loans” on my website at www.success-strategies.com. I hope you find my articles helpful!

Should You Be Committed?

Not long ago, I was approached by a Client who said he wanted to own more land. With his 3,000 cow herd, we agreed that it made a lot of sense. He could grow more of his own feed and probably decrease his overall feed costs.

“What about the down payment?” I asked. He had no excess equity in his land base to borrow against, so I explained that he would need 30-35% of his purchase price as a down payment. His lender would then provide the rest of the money. Buying 100 acres at $10,000/acre would cost $1,000,000. This would require $300,000 to $350,000 for the down payment. “Where am I going to get that?” he asked.

Actually, I was glad he asked. I suggested that he start putting all odd amounts of income, e.g. USDA funds, bull calf money and at least part of his cull cow money into a separate savings account. My intent was not to draw that fabulous 0.01% interest we currently receive on any savings, but rather it was designed to segregate these funds from his checking account, with the sole intent of protecting the money from being spent. I call it AGS – Acute Goal Savings.

This went fine for about two months, after which I asked how much had been put away. “Well, I just recently quit doing that!” Of course, I asked why… His reply was, “It’s just too much of a hassle. Besides, the bull calf money is my ‘fun money.’” Wow, I thought, this should represent worlds of fun in 2014!

I tried to rationalize with him, “Well, if you get the additional 100 acres, won’t your profits go up and provide you with even more ‘Fun Money’?” His reply: “Nah. That’s crazy.” It made me wonder if I should be “committed” for suggesting such crazy things…

Now, contrast that with another Client who milked 600 cows. I suggested the same AGS concept to these two brothers. They started it two months later and, after just 18 months, now have $50,000 in their AGS account. Within the next several months, they will have enough saved for the down payment on their goal of building a new fresh cow & maternity barn! This should reduce their over-crowding, boost their fresh cow management, and increase their herd’s milk production.

What was the primary difference in these two examples? In total dollars, the 3,000 cow herd owner’s dream was considerably bigger, but he lacked the “commitment” to the objective. In contrast, the 600 cow herd owners needed fewer dollars. However, the real difference was in their level of commitment, that necessary ingredient needed to convert their dream or goal into reality!

It takes both a Goal and a Burning Desire, also known as commitment, to reach your goal. With that in mind, I will leave you with a simple question: “Should you be committed?”

Knowing Your “Why”

Many of us understand the benefit of establishing a solid set of Goals. These can be for your business, your personal life or any number of other items. I believe they represent one of the most important tasks that you can undertake. Yet, many people set goals every year, but then fail to accomplish them. New Year’s resolutions are an excellent example of this. Why is it that these so often fail to come to fruition?

Actually, I am glad you asked! The reason is that setting your goals is only part of the process. Of equal importance is of knowing your “Why.” Why is this goal important to you? Why does it matter to you? Why do you want to accomplish this specific item?

Let’s look at one example. First, you may have the goal of having your dairy herd average 90 pounds of milk per cow per day. That’s nice, but why does that really matter? Well, you contend that this production level will make you more efficient. Then, I might ask, why do you want to be more efficient?

Somewhat frustrated, you claim that if you can operate more efficiently, you will be more profitable. So, I then ask why you would want to be more profitable. Is it just to acquire more money? Finally, you reply (somewhat out of exasperation at this point) that being more profitable will allow you to take your family on a vacation occasionally, have money set aside for your two children to go to college, and also get you financially prepared to retire sometime in the future.

Aha! I finally got you to focus on what really matters most with your Goal Setting. Of course, the Goals, themselves, are significant. Without them, you will meander, at best, in making any progress. In addition to setting your goals, though, it is essential to understand “Why” you are pursuing this goal.

Without understanding why, it is so easy to get frustrated and give up your pursuit of any goal. However, if you take the time to understand and write out your “Why,” you will be better positioned to “stay the course” and ultimately reach your objective. For example, if the weather turns extremely hot or your feed supply gets damaged due to rain or other weather issues, you may get easily frustrated and give up your goal of hitting the 90 pounds per cow per day goal we discussed above, settling for less. 

On the contrary, though, if you understand why you are pursuing this goal and the long term implications of actually reaching it, you are far more likely to do whatever it takes to reach your long term objectives. Knowing your “Why” will provide you with the motivation necessary, as the Boy Scouts state, to “Improvise, adapt and overcome!”

Build a solid foundation under your Goals, by knowing your “Why!” I think you will be glad you did. To learn more about Goal Setting and related topics for your business, check out the articles on the home page of my website at www.success-strategies.com. I hope you find them helpful!

The Trial of the Century!

I realize that, given the solid margins of 2014, it is easy to forget about how difficult the prior eight years had been in the dairy industry. Recall the challenges of high feed costs for most of 2008 to 2013 and the calamity of $10 milk prices in 2006 and 2009? These years represented the trial of the century! I know that we would all like to forget these years, but, given our participation in a “world market,” some of them could occur again. Would you be prepared if these events happened again?

Over the next several blogs that I produce, I plan to talk about what to do if these events recur and, more importantly, how to prepare for them ahead of time. Think they cannot happen again? The September 2, 2014 issue of the Daily Dairy Report stated that we have seen similar times when ourU.S. prices are well above prices in the world market: “Similar price levels in September 2012 led toU.S. cheese imports (primarily fromNew Zealand) of more than 40 million pounds in November and December. CME spot Cheddar cheese prices that year traded above $2/lb. in early November but closed 2012 near $1.70.” Could this happen again? Possibly…

Would that impact your dairy operation? I know it would affect my Clients! In a moment, I will explain how I know. What has been different for the survivors historically? I believe it boils down to two primary factors. The first of these is having a plan on every major decision they make in their business. Now, please understand. No one really wants a “plan.” What they desire is what having a solid plan can provide them: the ability to make better decisions and, thus, achieve more profitable results!

The second major factor to success is knowing where you are financially at all times. I’m sure you have heard the expression: “What gets measured gets improved,” but please remember that “What gets measured and recorded gets improved measurably.” The reason for that lies with the fact that these steps will lead you to take action and make improvements in your business. The reason for this is that you know what needs to change to move forward successfully. We can’t do that if we are “flying by the seat of our pants!”

We have to know our current financial position at all times. Whether you are facing your banker or just facing the future, you simply have to know. It’s your choice and your responsibility. Next time, I will introduce you to a new system that some of my colleagues and I have been developing for making these very measurements within your business. Until then, start to review your marginal costs and returns. I think you’ll be glad you did. 

“No Excuses!”

Previously, I have used the following quote from General Eric Shinseki of the U.S. Army to make an important point: 

“If you don’t like change, you’re going to like irrelevance even less.”                                             

We are in a constantly changing industry environment where decisions we made five years ago are not necessarily as effective as they previously were. It is time for each of us to take back the reins of the decision making process and adopt a more proactive approach moving forward. Management consultant Peter Drucker stated that, “The best way to predict your future is to create it.”

Yes, you’re saying, but how can I do that, given the dairy industry’s severe downturn the past five years, and “under the present circumstances?” I’ll tell you how – Get out from under those circumstances. Change your thinking. Alter your approach. It has been said that if you keep on doing what you have been doing, you’re going to keep getting what you’ve been getting… I contend that is just simply not true. In some cases, it can cause you to go backward! So, what do we need to do?

Embrace change as you encounter it. Of course, we all like the familiarity of our normal day-to-day processes. At times, I am guilty of this, too. However, when things are changing as rapidly as they are in the dairy industry today, we run the risk of getting “run over” if we simply stand still. Yet, you are thinking that you just finished restructuring your bank debt and are getting most of your Vendor Payables caught up (hopefully). Can’t you stop and take a break? Do so at your own risk. Here is a list of items that I’d like you to think about: 

1.)    Where do you really want to be in five years? In ten years? How can you get there? What will it take to succeed in reaching those goals?

2.)    Who will take over your business when you are gone? Do you have a plan already in place? If not, why not develop one? Several years ago, I witnessed a sad but true situation where one person controlled all aspects of his business operation and, frankly, made all of the decisions. One day, at the ripe old age of 42, this person was killed in an unfortunate auto accident. The result was absolute chaos around his business. No one else was trained to make effective decisions, and there was no succession plan in place. It was a financial nightmare for his family. It all could have been avoided with a minimal amount of planning.

3.)    Have you implemented a “Milk Marketing Plan” yet? Are you using Put Options to establish a floor under your milk price? Likewise, are you working closely with your Nutritionist and others to lock in the best prices on feed at all times, not just now because they have been so high? Do you truly know your Break-even Points on milk price and feed cost? You need to know these!

4.)    As outlined above, have a plan on everything you do. Can you be assured of always making the correct decisions? Of course not. However, your odds of success will be greatly improved if you think about and develop your own plan for your business, particularly in comparison to letting the industry or others decide for you.

Former Notre Dame football coach Charlie Weis, upon being hired to lead a team that had win-loss records of 5-7 and 6-6 the prior two seasons and hearing the players complain about the school’s administration, replied as follows:

“Quit blaming everyone but yourselves for the reason there was a coaching change. There was a coaching change because you’re 6-6 and last year you were 5-7. There was a coaching change because you guys didn’t live up to the expectations around Notre Dame… Why don’t you just look in the mirror? Maybe the reason why you were 5-7 and 6-6 is that you’ve played crummy. Just maybe.”

“He certainly got their full attention. He claimed that you could have heard a pin drop. His message had come through loud and clear: ‘No excuses!’”

                        Charlie Weis in his book No Excuses

Let’s follow Charlie’s advice and realize that, as an industry and as individual participants, we have not always played by the best laid game plan. Reset your course today and join me in accepting “No excuses!”