What Do I Do Now?

A lot of businesses, especially in the dairy industry, have run into cash flow problems during the past 18 months. Of course, this has also put negative pressure on their working capital position, i.e. the amount of short-term inflows of cash minus their immediate obligations for outgoing disbursements.

Much of this negative financial pressure could have been avoided, but sometimes politicians overlook the “unintended consequences” that can accompany their efforts at “vote buying…” Unfortunately, with the advent of excessive stimulus money, we were rewarded with increased inflation and higher interest rates from the Fed, as they attempted to rein in the effects of inflation.

As a result, most businesses were hit with higher costs, including labor. Of course, workers also need to survive financially, necessitating higher wages. Regardless, this is where we are currently.

So, “what do I do now” is a question many producers are asking today. Should I sell out while asset values are elevated to new highs? Will there ever be a better time to exit?

These are both great questions. However, I believe a better question to ask is this: “Is it sustainable? Can you cash flow, given the current & expected economic variables?”

For example, in the dairy industry of 2023, milk prices were average at best, and feed costs were exorbitant. Add to that the rising costs of supplies, repairs, labor and fuel, and we are in a perfect storm of negative cash flow and weakened working capital, as described earlier.

The problem is that for most businesses, they cannot borrow their way out of this, and even if they could, banks have been unwilling to provide the necessary refinancing needed. Thus, we need to look at the sustainability of these operations. I would invite you to look at the Cash Flow Analysis tools offered at https://success-strategies.com/shop/ to help you in your measurement. There you can run your YTD Cash Flow Analysis & complete some “What If” scenarios. For example, what if I could lower my labor expense by one Full Time Equivalent (FTE)?

If your operation is sustainable, at least at more normal Revenue & Expense levels, is it still something you want to do? Alternatively, do you want to exit and capture the Equity that you have built up over the prior years? Please take the time to truly consider your “Why?”

Believe me, if you know your “Why,” the “How” part becomes more straightforward. Is your “Why” for the family to continue for many more generations, is it to put your children through college or some other reason? This answer is crucial for you to reach.

To recap, to answer the question of “What Do I Do Now?”

• Consider the business’ sustainability.
• Really identify your “Why.”
• Then, if you wish to move forward, study every Revenue source, potential new ones, and opportunities to diversify your operation.
• Finally, study every cost & ask yourself, if I needed to cut my costs by 5% to reach break-even levels, could I do it? What would I reduce? Your answer will follow this process naturally.

This should provide you with methods to find financial relief for your business. What is the Next Step for you? Please let me know if I can assist you. You can reach me at john@success-strategies.com, and consider the following advice:

” Some men have thousands of reasons why they cannot do what they want to, when all they need is one reason why they can.”

Willis R. Whitney

Let’s take your business to the Next Level!