“How can they do that?”
I always find it interesting to visit with various business people and discuss the challenges they are currently having with regard to running their operations. One of the most common discussion points I have had with many producers revolves around how their cash flow results compare with others.
While I am in the early stages of developing a new tool that I feel will be beneficial to producers in this analysis of their operation, I have noted that there are three primary factors that seem to be having a positive impact upon the cash flows of these same dairymen (Please note that I have intentionally left out opportunities for diversification, since these vary so dramatically from one region to another.).
Here are three factors that have been and will likely continue to impact the cash flows of dairymen:
- Maintaining their focus on sound Cost Analysis – Now, before some of you write in to remind me that we cannot cut costs such as feed without impacting the cow’s performance, save your time & effort. You are correct that we should never cut items that impact the herd’s performance, health or longevity. This will always come back to haunt us. However, if 10 producers can, for example, get their cost of Supplies down below $0.60/cwt, then you have to admit that: a.) it is possible to do so. b.) you can also (You might even want to meet with others to discuss how they are doing it. This is called a “Master Mind Discussion.”).
- Having extra Cattle to Sell – This requires a plan to develop this additional cash flow stream, and yes, I know that some animals are selling at really low prices right now. However, they have not always been inexpensive and with the use of tools such as Double OvaSync and sexed semen, this has now become a solid reality. Several of my Clients have used these tools to develop a regular monthly cash stream for themselves. Selling 20 fresh two-year olds per month provides them with $26,000 to $40,000 of extra revenue. Recently, I’ve heard people claim that if I sell them at $1,300 per head, that’s less than I spent to feed them. My response is that it certainly shouldn’t be. Besides, you have to play the long game here and, on average, you’ll be fine. Heifer feed has been very inexpensive these past few years. Feed costs will go up and down, but so will cattle prices; Focus on the overall results of the long game. Selling extra animals in 2018 may be the difference between your cash flow being positive or negative.
- Breeding some animals to Beef Bulls – This concept is not new, but after using top semen on females for 2-3 services, and in some cases sexed semen, does it make sense to breed animals to beef semen to potentially boost fertility and be positioned to sell bull calves at a $200 per head premium? On top of the $200 per calf premium, you potentially avoid multiplying animals that may be less fertile in your herd. Overall, I think you’ll be better off financially.
If you would like to learn more about similar topics and the tactics our Clients have used to improve their outcomes, as well as what applications of these lessons you can make in your business, please join us for our next Success Strategies Mastermind Group series of quarterly workshops in July 2019. They are designed to teach more people the Finance & Strategy Concepts that I offer business people. Signups have begun, giving you the opportunity to learn these same concepts and meet with other producers who have overcome some of the same challenges you may be facing. Check them out at:
https://success-strategies.com/mastermind-group-for-dairy-farmers/
These are just three items that I see producers doing to boost their overall cash flow results. Hopefully, these ideas will expand your thinking to some extent. I hope you find them helpful in your business. This entire thinking process is absolutely critical today, and if you need assistance, please e-mail me at john@success-strategies.com or check out our website for many useful tools for your ongoing business evaluation at www.success-strategies.com. I’m always available for a follow-up call and wish you the best of success!
