Wow! Wasn’t 2009 a real tragedy in terms of overall cash flow and bottom line results? It was absolutely pathetic for most producers. Since then dairymen have been enjoying the fruits of higher milk prices. How can we avoid revealing the same calamities again? What could you have done differently as a manager? These are critical items to spend some time on.
The world of finance continues to amaze me. Recently, I had two clients whose banks decided that, in their opinions, they can no longer survive.
Well, well, isn’t that interesting…I don’t want to rain on anyone’s parade, but they had already survived! We had been in the process of rebuilding their working capital and positioning them for a better outcome during any future downturn. Learn from the past, and see what needs to be changed. For those items not optimal, let’s adjust our course so we achieve better results going forward.
I’ll give you an excellent example that had recently happened with one of my clients. We approached the bank with the possibility of refinancing their real estate and moving some short term debt onto their real estate. This is not that unusual of an approach to restructuring someone’s debt load. Nonetheless, it was an excellent example of how something as simple as a debt restructure can turn an operation around. This client achieved a positive monthly cash flow within 2 months! As you can imagine, they moved forward in a very positive manner when milk prices climbed. The lesson here was that if their lender had dwelled in the past, they would still be struggling with their cash flow today.
What can we do to position ourselves for a better future? First, here are a few things not to do:
Here are some items you should do for your business:
Develop your plan and include your lender in it. Then, you won’t be asking yourself where all the lenders have gone. They will be knocking on your door.