The Long-Term Impact of Positive Decisions
In so many situations, the focus of our business decisions revolves around their short-term effects, rather than the long-term impacts of these same decisions. I understand that we all occasionally face a decision with short term implications, but I would encourage you not to overlook the long-term impact of positive decisions.
Here are a few examples:
- Fill the barn – I understand that we sometimes have an oversupply of milk in comparison to what the market demands. However, you cannot solve that issue by only running your facility at 80% capacity. The supply imbalance is a market issue and certainly one that I would encourage you to get involved with at your Cooperative level. However, it is not one that you can solve singlehandedly. With that in mind, run your facility at its most optimal capacity. This will boost your efficiencies and profits to their highest level. Then, get involved to solve the overall industry supply imbalance.
- Establish sound Feed Contracts – Whenever it is possible, line up feed contracts to your advantage. I understand that this is not always feasible, but just because it isn’t for one time period doesn’t justify overlooking it when it does become an option at a later date. Of course, this requires studying the markets for key opportunities, so make it a part of your regular work routine. It takes less time than whining about feed costs and can pay huge dividends. I recall that one producer told me he didn’t want to be holding any contracts if he decided to sell out. That was last fall. However, it ended up that he did not sell out, and even if he had sold, he could have marketed these contracts at a huge profit. Perhaps, he should have contracted feed, regardless of his next steps. There is always a market to “re-sell” good feed contracts.
- Study your Efficiencies – Here are some I listed in one of last month’s blogs:
- Feed Efficiency – Pounds of Energy Corrected Milk/Pounds of Dry Matter Intake. Can you hit a level of 1.50-1.60?
- Labor Efficiency – Are you maximizing your worker outputs? I understand that the demand for employees has increased, but if they go to Amazon or Walmart, these same employees won’t be standing around idly either! You may even want to ask for current employees’ input for ways to boost their efficiency. The best ones (i.e. the ones you really want to keep…) will want to help you on this issue.
- Farming – Are you making the best use of your current land or just doing what you’ve always done? Some new thinking may even offer up an opportunity to diversify your operation.
- Debt Structure – Are your loans structured to maximize your Cash Flows, or, as I sometimes observe, are they set up to suit the current appetite of the bank, or, worse yet, to provide them with a potentially “quick exit?” I’d be glad to discuss this with you if you so desire.
- Use of Automation – Robots are the latest rage, and I have several Clients who are looking at them currently. They do represent an investment, but the payback can be huge, considering the current cost & availability of employees, the price of benefits and the rising cost of Workers Compensation programs. All of these factors need to be considered before you decide if they are right for you and your operation, but please don’t just “write them off” as being “too expensive.” They may be just what your operation needs.
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/
Hopefully, these suggestions 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!
