‘There Is No Try…Only Do or Do Not’

We are now in our seventh month of low milk prices. I’m sure you are tired of this low price period and its implications. Many people are stressed by their increasing accounts payable. This, of course, is normal. Remember that these low milk prices won’t last forever. Yet, I would also suggest we need to all move beyond the current dilemma and initiate action to complete a successful turnaround. I have heard the phrase “we can’t” too many times. For example: 1) “We can’t keep our milk prices high enough for long enough to even get close to our break-even point.” 2) “We can’t get our feed costs down to a reasonable level.” 3) “We can’t hire the right kind of people at our dairy.” 4) “We can’t get the appropriate financing to really accomplish what we want to do.” The list goes on. However, the truth is that you can overcome each of these barriers to success! You not only need to try, you need to adopt a mindset that literally says, “We are going to get this done!” Let’s look at the above list of items one by one.

  • Do you really think you cannot reach your break-even level? First, do you know what it is? If you already know, congratulations. If not, determine what level of milk price and/or production you need to reach in order to cash flow. We will soon be offering an on-line tool to accomplish this task. Make certain that this level will also cover the principal and interest you need to pay on your loans. Once you determine that level, you can use milk options to reduce your exposure to price downturns.
  • You think you cannot keep feed costs down? I have clients who are enjoying excellent feed prices. How do they do it? They study the market, stay in touch with people who can help them (because none of us can know everything…) and utilize the best nutritionists available. The combinations of these factors should assist you in keeping feed costs down. If you use a professional nutritionist, lean on them for their guidance. They can be a tremendous asset to you, and if they are not being helpful, maybe you need to find one who can more fully assist you.
  • What is it that makes for a great working environment? Everyone wants to be paid fairly. However, great working conditions go beyond that. How do your benefits and other job attributes compare with other employers? Do your people get sufficient time off to spend with their family? Employees will only be happy at work if they are satisfied with conditions at home, and how can they be pleased with their home life it they don’t have one? Communication becomes critical. It allows you to stay in touch with the needs of each of your employees. Allow time for their feedback.
  • You really can’t get the financing you need to accomplish the growth or other changes you want? First, have you clearly defined what it is you want to accomplish? Have you provided your lender(s) with a written plan that outlines your goals and any borrowing needs? I have worked with clients to complete the approval of many different financing plans with their banks. Many of these were plans for business growth and acquisitions, and a few of them were financial restructuring plans. They all required time, and each needed a plan that clearly outlined what we were trying to accomplish, what our proposed time table was, and what we expected to achieve in terms of cash flow and other financial results. Without a plan and some degree of flexibility, we would be doomed to meandering from one possible goal to another.

It’s time to get beyond excuses and develop goals and a plan for the future. Remember what Yoda so brilliantly exclaimed in the Star Wars episodes: “There is no try. There is only do or do not.”

Stepping over Dollars to pick up Dimes!

In my last Blog, I promised to address the importance of knowing your “Why,” and I assure you that I will cover that topic next time. However, I wanted to share a great debate/discussion that I heard just recently. I will cover the “Why” topic next time.

This discussion occurred when two people were discussing what expense areas really matter. The accountant suggested that all expenses are important, and the Nutritionist countered that the only one that really matters is feed expense, since it makes up 50-60% of a dairy’s operating costs. He justified his opinion by pointing out that reducing this cost by just 5% would yield $0.50-0.75/cwt cost savings! He went on to laugh at the producer who was busy saving 5% on the drugs used on his dairy. Heck, he pointed out, that only amounts to $0.02/cwt.

Our Accountant, on the other hand, quickly replied that every cost savings is beneficial. He was adamant in pointing out that 5% savings on all the other expenses a dairy pays can also yield $0.40-0.60/cwt. So, who was right?

Actually, they both were correct. With feed representing 50-60% of your expenses, any savings here can be crucial to your bottom line. This is even more significant if the savings come from reducing “feed shrink,” since this savings is close to free! It usually just requires better management of your feed program and its inputs.

If the cost of other items, including drugs used, exceeds your margin over feed cost, you will undoubtedly have a cash flow challenge. Thus, the Accountant was correct, too. What to do?

The answer is to monitor all of your costs. At the same time work to minimize all feed shrink, especially with high priced commodities and expensive silages. Finally, do make a point of measuring all of your costs. As I discussed in a prior blog, you need to know these cost numbers to make a profit. Visit my website at www.success-strategies.com to learn more. Anytime your expenses exceed the break-even level for your operation, you need to start studying them very closely. Your future depends on it!

What? High Interest Returns on your Money?

Ever wonder how to boost your interest earnings, especially with rates that banks pay you being so low? Granted, you may earn about 0.10% on any balances left in your account. Why not earn it another way by saving some money on interest expenses? There is still a way to do this. 

When your milk check comes twice per month, why not pay down your revolving lines of credit for a couple days, while you are deciding specifically what invoices you will be paying? While these earnings are not huge, they are far greater than anyone can earn on any funds sitting in a checking or savings account today. If your lines are at a rate of 4.25%, you can save over 40 times what the bank will pay you on any unused balances. Sounds like a good trade to me…

When your milk check arrives, assuming you have a revolving line of credit, you simply pay down the line, especially if it comes on a Friday or before a three day weekend, and then save the loan interest until you send out checks to your vendors. Just be certain that you have the funds back in your checking account before your checks written start to clear the bank. Otherwise, the overdraft fees will wipe out any savings you have had on your line interest.

You may also want to check with your bank to see if they have an automatic “Sweep Account.” A sweep account will do the same thing for you every banking day, ensuring that you minimize your interest expenses, while ensuring that your checks are always covered. This sweep process is done completely via a computer program, designed to save you money, just like the manual process I described above. 

That, my friends, is good for your bottom line. It represents Next Level Thinking!

When Should I be Worried about my Business?

I often hear Clients say that they are worried. It sometimes makes sense to express concern about items in your business and personal life. However, does it pay to literally worry? I don’t believe so. Mark Twain described worry as the interest paid on a debt you never owed…

While we should all be studying various facets of our business, I see little benefit in worrying. Will it make things better? I doubt it. Will it add any time to your life? I don’t think so. It will be more likely to accomplish just the opposite.

Will worrying add any clarity to your business thinking and acumen? I doubt it…

Napoleon Hill suggested that we should, “Kill the habit of worry, in all its forms, by reaching a general, blanket decision that nothing is worth the price of worry. With this decision will come poise, peace of mind, and calmness of thought which will bring happiness.”

A lifelong friend of mine stated that he considers all of the possible outcomes of any decision, and then, if he feels he can live with what he believes is the worst possible outcome, he moves forward without worrying further about it. Sounds like good advice!

My advice: Quit worrying, focus clearly on the decision at hand and the options available, and based upon what you and your advisors know, make your best choice. None of us gets every decision right, but I believe you will be well on your way to achieving higher levels of success as a result!

A Unique Approach to Boost Your Interest Earnings

Ever wonder how to boost your interest earnings, especially with rates that banks pay you being so low? Granted, you may earn about 0.10% on any balances left in your account. Why not earn it another way by saving some money on interest expenses? There is still a way to do this. 

 When your milk check comes twice per month, why not pay down your revolving lines of credit for a couple days, while you are deciding specifically what invoices you will be paying? While these earnings are not huge, they are far greater than anyone can earn on any funds sitting in a checking or savings account today. If your lines are at a rate of 4.25%, you can save over 40 times what the bank will pay you on any unused balances. Sounds like a good trade to me…

 When your milk check arrives, assuming you have a revolving line of credit, you simply pay down the line, especially if it comes on a Friday or before a three day weekend, and then save the loan interest until you send out checks to your vendors. Just be certain that you have the funds back in your checking account before your checks written start to clear the bank. Otherwise, the overdraft fees will wipe out any savings you have had on your line interest.

 You may also want to check with your bank to see if they have an automatic “Sweep Account.” A sweep account will do the same thing for you every banking day, ensuring that you minimize your interest expenses, while ensuring that your checks are always covered. This sweep process is done completely via a computer program, designed to save you money, just like the manual process I described above. 

That, my friends, is good for your bottom line. It is a great example of Next Level Thinking!

Getting Yourself on the Right Team!

“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 is exactly what they’ll get since it’s so much easier to have.”

I love this quote from former Notre Dame head football coach Lou Holtz because it succinctly says so very much. Which team do you want to be on with your dairy operation?

Here is an excerpt from an article I recently wrote for the October 2013 issue of the Western Dairy Business:

Please allow me provide you with some points of comparison for two teams, because there are consequences involved with both:

1.)   ” The managers on the A Team have a definite plan that they follow very closely. Of course, they adjust their path occasionally, but for the most part they stick to their plan. Why? They do so simply because they spent a lot of valuable time with their key advisers developing this plan that will take them closer to their desired objectives. Does the B Team have a plan? Certainly. They have even considered getting it out of the file drawer to review it once in a while. They just haven’t found the time to check it again, so sometimes they get off course…

2.)    The A Team knows precisely where they are on a day to day basis in terms of herd health, milk production and reproduction. The B Team has considered collecting this information and maybe even putting together a daily summary report for their entire team, but they barely have enough time to keep the bills paid and meet with their banker regularly. One Nutritionist had suggested this, but they decided he just represented another cost that they could not afford…

3.)    Members of the A Team seem to have a solid handle on their costs. They get surprised sometimes, but it’s not because they are asleep at the wheel. They adjust course and may substitute one product for another. However, this is never done blindly. They simply discuss it with the appropriate advisers. The B Team, on the other hand, keeps a close watch on their more successful neighbors. If they are trying something, it might be worthy of consideration, no?

4.)    The A Team makes a lot of money farming, especially with the high feed costs we have seen the past several years. They invest farming funds carefully, and, as a result, achieve solid yields, which leads to stronger profitability. The B Team? Well, it’s not really their fault, and they would have hit better yields, but they couldn’t get their Crop Adviser or the fertilizer company to come out because their account balance was large and past due 120 days. However, as I mentioned earlier, they don’t feel it is their fault…

5.)    Finally, members of the A Team are very teachable. They have been in business for a number of years, but they realize that the industry has changed. They realize that they must change, too. The B Team? Their leader exclaimed to one young adviser that, “If he followed every recommendation he had received over the prior 20 years and they had all worked as planned, his cows would be producing 120 pounds day.” Sounds like it may have been worthy of consideration, in comparison to the 62 pounds per cow per day he was currently hitting…

What’s the message for us as managers? First, we need a solid plan. Second, we need to follow it and adjust course as needed, because none of us has a crystal ball into the future. We also need to realize that all of our decisions (or lack of them) have consequences. They can also impact our credibility with vendors, bankers, our business partners, and other key players, all of which will have consequences.

Which Team do you want your operation to represent?” I’m going with the A Team! To learn more about the points mentioned above, get a copy of my latest book, The Five Factors Guaranteed to Impact Your Future, at: https://www.createspace.com/4336264

Who Has Time to Develop a Plan?

We live in such a busy world, don’t we? While we are all trying to be more successful, every one of us still needs to take some time to “plan our work, before we work our plan.” 

I recently had a Client who said, “Are you kidding me? I barely have time to get everything done as it is. Now you think I should allocate some time to planning?” As soon as he completed his statement, I think it actually occurred to him what he had just said. He had realized that he needed a better plan to get things completed correctly and on time. I know you have heard the old adage: If you don’t have time to do it right, where will you find the time to do it over?

Doesn’t that same rule apply here? I am sometimes guilty of the same thing, that is, not planning the detailed steps of my work and then being disappointed when everything does not turn out quite like I had hoped. What can we do? I am glad you asked. 

There is never a bad time to plan tasks we wish to accomplish, but this is particularly true as we approach a new year. It has been said that the best time to plant an Oak tree is 20 years ago. However, the second best time is today! As you approach the end of this year and start planning for the upcoming one: 

–         Set some positive Goals for you and your Team.

–         Decide what Achievements you really want to accomplish.

–         Lay out the Steps necessary to reach these.

–         Determine what your intended Time Table will be for each step.

–         Decide Who will be involved. Do you need additional people or is it something you can hire an outside contractor for?

–         Establish some solid Measurements to track your level of progress.

–         Outline what Specific Activities you will use to monitor this progress and review them with your Team.

–         Finally, Celebrate Your Success and share the achievements with the rest of your Team!

Follow these eight steps, and I believe you will be well on your way to achieving higher levels of success!

Planning for Success

In my last blog, I discussed how we each need to have a plan for the success of our business. Guess what? Now is the time! It is late in the year, and I personally find that this is the most optimal time of year to complete this process.

There are several reasons for this. First, you have a fairly good feel for what the current year’s results will be. This will provide you with insight into the areas you want to improve. It will also guide you to set new objectives for next year.

Second, it is nearing year end, and your banker will be pleased to know that you are planning for next year. Why not share a copy of your plan with him or her? This is especially important if there may be new financing required…

Finally, any expense involved will be deductible for taxes this year. With that in mind, let me provide you with several ground rules:

1.)    Establish what planning tasks you want to accomplish while you are doing this process. What is most important to you for next year?

2.)    Know “Why” you want to accomplish a certain objective next year. If you know your why, the how will become much more evident!

3.)    Get offsite to do this planning.

4.)    Yes, I did say offsite! This will minimize your distractions and interruptions. Besides, you don’t work for “Corporate America,” so you don’t need permission to do this. In fact, I believe your expenses should be deductible. Ask your Accountant.

5.)    Stay focused (another advantage to being offsite). Stay on task and push yourself to set higher and more challenging goals.

6.)    Plan an agenda before you go, and follow it closely.

7.)    I suggest that any business owner do this at least once per year. Having a mid-year checkup is not a bad idea either.

8.)    Best wishes for a successful planning session.

Follow these steps, and I believe you will be well on your way to achieving higher levels of success, your reward for Next Level Thinking!

What Was He Thinking?

Recently, I was talking to a colleague of mine who does nutrition work for many of my Clients. He pointed out that my Clients were operating at such low levels of debt, it must be easier for them.

After thanking him for his compliment about how I had helped them achieve these lower debt levels (and, believe me, this is not true for all of them), I started to think about some of the objectives we had set and accomplished with these Clients during the past ten years. He was correct in his statement, but I believe that everything we achieved could be done at any dairy or, for that matter, any business at all.

Before you tell me that this cannot be done on your operation, allow me to explain that I cannot remember any case where this was completed with ease. Every one of these Clients had challenges to overcome and required a solid game plan! We became focused after the dramatic downturn in 2006. I recall getting to the end of 2006 and saying to my wife, “Man, I hope we never have another year like this one. I am exhausted!”

Little did I know what was waiting around the corner in 2009 with its rock bottom milk prices or in 2008, 2012 and 2013 with record high feed prices… So, clearly we lost some ground (or made progress at a slower rate) in those years, but we still pushed forward.

 I believe the keys include:

1.)    Develop a plan and have clearly established Goals to shoot for in terms of profitability and debt reduction.

2.)    Make sure your debt structure allows you maximize your cash flows and still reduces your overall debt levels each year.

3.)    Don’t borrow for anything unless you need to, but when you do, shop for the best rates and repayment plan.

4.)    Monitor your results every month. This is the only way you can stay on track and ensure that you reach your objectives.

5.)    Push yourself and increase your goal levels every year, whether it is on profitability, debt reduction or both.

6.)    Never give up. As Winston Churchill stated, “Never, never, never give up.” That, my friends, is a definite!

7.)    When you reach your Goals, as I am confident you will, celebrate with your Team. Remember, they helped you get there.

8.)    Finally, if you get off track, get some qualified assistance. You gain absolutely nothing by claiming that you never needed anyone’s help to get where you are but then “hit the wall,” as so many businesses have the last five years. If you need some guidance, get some. Why wait?

This will allow you to re-focus on Steps 1-7, after which I believe you will be well on your way to achieving higher levels of success, your reward for Next Level Thinking!

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!