Where Do We Go From Here With Our Cash Flow?
Wow! This has been a difficult start to our new year. Cash flowing has been difficult with milk in the neighborhood of $14-15/cwt. Given the rising cost of so many inputs and the recent difficulty of acquiring the financing you need, what can you do? Most banks still seem to understand this, but there is, at best, the possibility of delays on loan renewals because even their patience with the dairy industry has been wearing thin. One of the items I am most concerned about, in the entire scenario of finance and the world economy, revolves around the seeming presence of paralysis – that is, the inability to make a decision.
What can I do now, you ask? Here is what I have been doing with clients for years in an attempt to free up any paralysis of their thinking. This concept was actually developed by Dan Sullivan, president and founder of The Strategic Coach organization in Chicago. As you go through this process, please keep in mind what Dan has often reminded his clients of, “All progress begins with telling the truth.” Here’s how it works:
- Take a sheet of paper and draw lines to break it into four quarter sections.
- In the top left quarter, write “DANGERS” and list the items that are possible sources of loss for you, e.g. low milk prices, lack of feed inventory, reproductive problems in your herd, etc.
- In the top right quarter, write “OBSTACLES” and list items where you are stuck, i.e. can’t seem to move forward. Possibilities here are your present cash flow, the need to plan for the next generation or other areas.
- In the bottom left quarter, write “WEAKNESSES” and make a list of items where you are lacking a resource. Some examples might include new financing needed, a feed loan that is presently greater than the value of your current feed inventory, or the lack of CPA prepared financial statements.
- Finally, in the bottom right quarter of your sheet, write “SETBACKS” and make a list of all items that you have actually lost in the current downturn. These might include your profitability, your lending relationship with your bank, some of your former suppliers or other items.
After you have made your list that fits into each category, review each of them and ask yourself if all the items on the lists are equal to each other. Circle the item on each of the four lists that is most critical. Which of them is most important to the future of your business? What can you do about each of these four top items?
Remember, our objective here is only to “UN-paralyze” your thinking. It has been my experience, thus far, that this exercise frees up clients’ thought processes and then accomplishes two other tasks. First, it identifies specific problems you are facing. Additionally, it helps you to identify potential solutions, and that is what this is ultimately about.
As Victor Frankl said of his experience at Auschwitz, the vilest of Nazi concentration camps, his survival depended upon the realization that his old life was over. His new life and future would be vastly different. The same holds true for us in the dairy industry. The old game is over. We are in a new game now. Even as we anticipate the potential for higher milk prices, we will all need to update our thinking and processes. The scrutiny to which we will be subjected will continue to be intense.
Is this a bad thing? Not necessarily. However, we must each decide if we truly wish to operate in this environment and, if so, be prepared to change our thinking. How will you deal with this and move forward in your dairy business? Hopefully, this process will assist you to accomplish that task. If you would like to learn more about similar 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 Success Strategies Business Navigator Program in April 2019. They are designed to teach more people the Finance & Strategy Concepts that I offer my Clients.
Click on the Image To Hear John Explain This Decision making Method First-Hand In His Interview With Dairy Business Magazine.