How Well Are You Prepared?

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!