Tag Archive for: Future Strategy

Why Does This Have to be so Painful?

I understand that many agri-businesses are facing challenges right now. I’ve come to accept that as an ongoing event, just in various sectors as the years go by. How would you like to be the recipient of the following notification? It was the first item I saw with this new Client.

“You requested a forbearance from collection, rather than a restructuring of the loans. A series of meetings were held with you to negotiate the terms of a request for a forbearance from collection from the Bank. Based upon negotiations, which culminated with a meeting on December 20th, your forbearance plan was clarified and is now subject to approval. This letter outlines the terms under which the forbearance is approved.”

And, believe me, the terms were onerous. I believe I’d rather have a root canal… So, my first task was to write a three-page email explaining why the bank’s plan was unacceptable for us. Why would we want to sell the very assets that produced the cash flow needed to repay the debt? Nobody was denying that the Client owed the money to the lender. They just needed a plan that didn’t handicap the business operations or result in “brain damage!”

We were not going to sell the very items that would repay the debt. We just needed some time to get things moving in a new, positive direction.

So, what did we do?

  1. No, we did not agree to sell their dairy herd. The mature herd is what allowed us to stay current and repay older accounts payable.
  2. The market for heifers was quite weak at the time, so we kept them to maintain the herd.
  3. No, we would not agree to sell all their real estate, which has since increased in value by 25%. However, there were several non-essential, small acreage parcels that were very desirable for other buyers who wanted them for home sites. We were also able to lease back two of the parcels to maintain our feed production and provide the new owners with some additional income.
  4. We asked for an extension of the current loans. We did not ask for extra money. We just simply needed some time to “plan our work & work our plan…”

Did it work? Oh, yes, in nine months. The very people whose plan I called “Dead On Arrival” thanked me for implementing the plan that I’d proposed. It was one of the fastest turnaround situations I’ve ever worked on.

Why? Cooperation, Focus & Relentless Effort!

“There ought to be ways of reforming a business, other than by merely putting more money into it.”    Winston Churchill

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What? A Crisis? How Can That Be?

It was interesting that when I walked in, that was the first thing my Client hit me with… But, hey, that’s the type of challenges we’ve always thrived on, so I thought – let’s just go with it.

My preferred approach? Understand that, as Author Dan Heath stated in his book Reset, “There are no crises, only options.” What did he mean by that? You’re trying to balance revenues and expenses, put out “fires” with two vendors, and you’re short on help with one employee currently on vacation and your office manager out on maternity leave…

A couple of suggestions:

  1. Relax – Yes, you have some challenges, but let’s keep them in perspective.
  2. Communicate – Discuss your late invoices with the vendors and then work out a plan that works for them and is achievable for you.
  3. Consider – Perhaps a LT plan might work… Take a close look at the Cash Flows of your business. Remember, if you measure it, you can understand it. If you understand your cash flows, you can develop better controls over it, and if you gain more control, you undoubtedly can improve it.
  4. Review – What options do we have? Tune out the “noise” and think it through.

Recently, I read a newsletter by Peter Diamandis, author of Abundance and numerous other best-selling books, about how he remains optimistic. Someone asked, “Peter, isn’t optimism kind of naive right now?”

He replied, “I want to answer it honestly, without the stage-lights version of myself. The short answer is that optimism was never about believing everything will be fine. It’s a stance on where agency lives. The future is not something happening to you. It’s something happening for you, if you decide to grab the wheel.”

He adds, “Optimism isn’t something I feel. It’s something I do, every morning, usually before I’ve earned the right to.”

So, the next time you feel “overloaded,” just stop and breathe deeply. As bad as it might seem, whatever hurdle you are approaching, it has likely been overcome before. Think it through, and if it seems insurmountable, please don’t wait too long to seek help. After 28 years of guiding Clients through their business problems, that is probably the #1 mistake I see people make – waiting too long to ask for assistance.

“The future belongs to those who see possibilities before they become obvious.”

John Sculley, Former Apple & Pepsi CEO

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Wow! What Will Happen Next?

That, my friends, is a great question. An even bigger question is “Can you stay ahead of the curve?” Every business, including my own, is facing the same dilemma of cost increases. As usual, my starting point is measurement. If you are not measuring your Cash Flow, including both Revenues & Expenses, you could get blindsided.

We are presently in an inflationary period, and despite the current Administration’s best efforts, the cost trends will likely continue for some time. Granted, inflation may have dropped back to 4-5% now, which is far better than what we saw five years ago, but prices are still climbing, nonetheless.

What can you do? I would suggest that you begin by measuring your financial results. If you aren’t equipped to do so, hire someone who is. I do it for all my Clients monthly, and it has helped their margins immensely. If you measure it, you can grasp a clearer understanding of what needs to change on either expenses or, if possible, on your revenue sources.

Once you understand your Cash Flow, you can gain better control over it, and, of course, if you have more control, you can improve it by making changes, as needed. Is this all about cost cutting? Absolutely not. You will want to make sure your costs are reasonable, but if you are running an older facility that has some physical limitations, you are not likely to gain some of the same efficiencies as a brand-new facility may provide. However, you can still make changes that result in positive progress.

If you have a solid handle on your costs, then you might want to explore potential new revenue sources. I have several Clients who face limitations within their facility, but despite their inability to grow, they have identified alternative revenue streams. I have Clients making money with Solar setups, Methane Digesters, Colostrum Sales, Marketing Beef Cross Calves for huge returns, marketing excess heifers from their dairy operation, Selling Corn & Wheat Crops, growing Almonds & other tree crops, and even renting space on their facilities.

My point is this. Don’t “sleepwalk” through this process. There are multiple opportunities out there. Study the options available to you and if you can’t identify them, contact me. I have a lot of experience with this type of work. Many of the ideas listed above have been initiated on my watch. It is not a job for the timid, and I would be glad to help you succeed even more!

“People are always blaming their circumstances for what they are. I don’t believe in circumstances. The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can’t find them, MAKE THEM.”

George Bernard Shaw

Let’s take your business to the Next Level!

Are You an “Overnight Success?”

I recently had an interesting conversation with a new Client who suggested that I was an overnight success. While I appreciated his kind comment, I had to admit that my “overnight success” only took 27 years of preparation.

This included many experiences, most positive & a few negative, to finally arrive at what may have looked like an overnight success… Believe me. There were plenty of rejections along the way. Yet, the best part of this entire process has been the wonderful Clients in this journey who had put their faith in my Team’s ability to navigate some “dangerous financial waters” and find a solution to their challenges.

Was it easy? No. If it had been, anybody would have been doing it… Here are a few examples for you, some of which may lead you to question my sanity in tackling these problem deals:

  • How about the food processing company who owed their bank about $8,000,000 and only had $2,000,000 of Accounts Receivable and Inventory on hand. However, they did have big hopes for the future of their product line(s), and we were able to get the bank to finance new equipment for an additional product line. This allowed us to generate cash and pay the lines of credit down to a more workable level. It also taught me that the only certainty when you are in the process of developing budget projections is that this is not exactly how things will turn out. Yet, the cash flow results were strong enough that it got us “across the goal line.”
  • Another Client was a struggling partnership that was burdened by owners not getting along & then getting hit with a cash crunch as their milk prices plummeted. In trying to identify the answer to their challenges, I was often reminded of the story told by President Ronald Reagan where a little boy was faced with a barn full of horse poop. When asked why he was so excited, he replied, “With this much horse poop, there has to be a pony in here somewhere!” The Client’s bank had just delivered a mandate through a letter, informing them that they should start liquidating assets. I responded with a three-page email, refuting their “short term thinking” and laying out a game plan for their successful continuation. I met with them every month, and, frankly, it was the fastest financial turnaround I’ve ever coached someone through. Within two years, they had sold the entire partnership operation and real estate, allowing two of the former partners to start new businesses that they are operating today.
  • Three other examples revolve around Clients who I would describe as “land rich & cash poor…” As a result of a horrid loan structure, they became strapped for cash. By restructuring their overall debt and expanding their operations, we were able to boost their overall cash flow to the point that they were very profitable and in a position to market young animals from their dairy businesses. This, too, created an additional source of cash to help them operate. Overnight success? No, but ones that would not have happened at all without the plans we designed together.

All these examples met with success, following a lot of demanding work, planning, and solid execution of the plan. Sometimes, I even had to remind them “Success often is described as the willingness to bear pain; not to be a pain…” By working together in each of their cases, I am pleased to report another “overnight success.”

“The difficulty lies not so much in developing new ideas as in escaping from the old ones.”

John Maynard Keynes

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What Is Your Reason?

I recently reread an old book from my personal library, entitled The Goal, written by Eli Goldratt & Jeff Cox in 1992. I read this 34 years ago, and, assuming you can still find a copy, I would highly recommend it.

Essentially, it is a novel with a great story that revolves around a corporate turnaround, one where the players initiate a change of strategy previously characterized by poor planning, numerous bottlenecks in the manufacturing process and consistently late deliveries.

As you might expect, based upon the title, the managers in this process had a two-fold mission to improve their delivery of product, but also set higher goals by challenging prior assumptions. I know. This is basic “corporate blasphemy,” but “challenging the system” is what I’m well known for. Frankly, it has served me very well.

Getting back to The Goal, it has some very solid lessons for us. Foremost, we need to take old assumptions at face value and consider that there are other ways to achieve new goals and accomplishments. One of my favorite parts in the book included a complete challenge to management on their thinking.

To put this into perspective, I had a recent meeting with a Client who was considering the completion of a new Bed-Pack Barn for their dairy herd. It would give them a boost in their operation by getting the rest of their herd out of muddy lots in the winter & hot sun in the summer.

They run a great operation with milk production/cow/day consistently in the 80-85 lb range. Unfortunately, the managing partners are sometimes dissuaded by well-meaning family members from making investments in their business that are proactive.

They asked if I felt they should complete this process, especially considering that the cost is being funded mostly by government money. I stated, using a section on page 150 of the book, that there are only two reasons not to complete it.

  1. If there was no market for their product. This is not the case for them or the Cooperative they sell milk to.
  2. If they are determined not to change anything in their operation for the better. I don’t believe that’s the case. If so, I probably cannot help them succeed…

Consider the pluses of this change. First, their business would improve from higher milk per cow. Additionally, their banker should be happy as the appraised value of the facility increases with no added leverage from more debt, decreasing their Loan to Value %. Even animal welfare advocates should be happy, given the improved conditions for their cows.

While the completion of this project is pending, I believe this would be a positive step forward. Are you facing a similar dilemma? As you think your hurdles through, please consider the positives & the potential downsides, but do move forward. What reason do you have not to accept the challenge to succeed?

“Change can be tough. But the only alternative is eventual obsolescence.”

Michael Hyatt

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Yes, But Does It Fit the “Value Equation?”

My good friend Tim had one question whenever we went wine tasting with our wives: “Does it fit the value equation?” Essentially, was a Cabernet Sauvignon that we were tasting really worth $75-100 per bottle, or could we receive nearly as much satisfaction out of a $35 bottle? It was a sliding scale for us, but it provided us with a better understanding of what we thought about a particular wine. It also allowed us to share our thoughts with each other on wines that we tasted, without hurting the winemaker’s feelings.

Recently, I started thinking about how this fits many industry expenses, too, and Repairs & Maintenance came to mind for me. It is incredible how much it costs to fix any equipment today. May I suggest that you consider the “Value Equation” when you are looking at potential repairs?

I recently had a conversation with a Client who told me he was looking at a possible $90,000 engine replacement and was quite proud that he had run this tractor for 10 years. While I am not advocating taking on more debt, a comparable new tractor would cost him about $300,000. With the zero-interest option offered, he could pay for it over five years at $5,000 per month. Consider the value equation here. For $90,000, he could replace the engine on a tractor that had thousands of hours on it. It could have any number of other items that would break down over the next 18 months, while he was amortizing the $90,000 repair at $5,000/month.

While every decision like this should always be completed by comparing all the options, using the “Value Equation” here led me to think that spending $90,000 on an old tractor was insane, especially considering the potential for added breakdowns. I will share with you that he traded in the old unit and received $60,000 for it, offsetting one year’s monthly payments. He has been well-served with this decision. When you are facing similar decisions, consider the impact of considering the “Value Equation,” and if I can assist you, please let me know.

“There ought to be ways of reforming a business, other than by merely putting more money into it.”

Winston Churchill

Let’s take your business to the Next Level!

What If You Could?

Recently, I was thinking about a Client with whom I have worked for several years and, as I reviewed their financial results, I was thankful for the positive progress they had made.

When I first met with them, they were quite disappointed that their results were not very solid. In fact, their banker had already put them on notice that they were close to being shipped off to the bank’s infamous “Workout Group.” That is a department you definitely don’t want to end up in. While some may think that it’s a place where you work out your financial challenges, I assure you that it typically is a department where the participants “work your loans out of the bank,” and it is usually high pressure.

Regardless, this Client was not very profitable, and, due to their losses, they were approaching a level of debt leverage that would make them unable to acquire additional financing…” Thus, I asked them the following question: “What if I could guide you to become more profitable and lower your debt/cow? Would you be interested?”

Their first thought caught me a little off guard. They asked if my assistance would be free. After assuring them that I was not with the Red Cross, we started serious discussions about how we could achieve these goals. My first task was to establish what they specifically wanted to accomplish and then, after evaluating what their current position was, start building a plan to move them forward.

Part of the process included a restructuring of their debt load. Of their total debt, far too much was on short term loans, and way too little was against their real estate, which was quite highly valued. Following the restructure, we got them involved in positive budgeting. After developing their budget, we tracked their actual results against it every month. As I have said before, if you measure it, you will better understand it. If you understand it, you can control it, and, of course, if you can control it, you can improve it. This is true with any item, including Cash Flow.

Once we had this process moving forward, we initiated a program with the help of their Nutritionist to boost their milk produced per cow. With the optimal nutrition in place, they started milking fresh cows 4X/day, at the beginning & end of each milking shift. With more cwts of milk produced, we lowered their cost/cwt, always a good thing to do.

Finally, I convinced them that with their higher production and improved herd health, they might want to expand. Making more total cwts, just as with their higher milk per cow, helped them to spread fixed costs out very nicely. Incidentally, the milkers still got their shift done in the same amount of time, even with the 150 added cows.

Voila! Just like magic, all these changes assisted this Client to succeed at a higher level. So, if you are having some challenges in your business, consider “What If I Could…?” I would be happy to assist you with the process!

“Let our advance worrying become advance thinking and planning.”

Winston Churchill

Let’s take your business to the Next Level!

Do You Care Enough to Fix It?

In my last blog, I discussed the steps needed to continually move to higher levels of achievement. I understand that we are often surrounded by negative news, but we cannot let that impact our levels of achievement. Often, it’s a matter of adjusting our approach, but sometimes it is simply a matter of managing our time more effectively.

On a phone call with a Client recently, I asked for an update on a key project they were working on. Instead of an update, I heard, “John we are just swamped right now…” While that might be true for a lot of us, we need to move beyond it. There are always more tasks to do than there is time for their completion. That’s why we need to prioritize our challenges & goals and lay out the steps to complete them.

First, here are the three biggest fallacies of “Time Management:”

  • People believe they can get more time. No, you already have all the time that is available to anyone. Thinking otherwise is what Author Dennis Waitley calls “Living on Someday Isle.” It’s a place where nothing ever goes wrong, and you have all the time in the world. You know, that place where someday I’ll…
  • People think they can save time & store it. This simply doesn’t happen. You must use it up, wisely, every day.
  • Some people believe they can manage time. Is this really possible? Or is it better to focus on managing ourselves within the time we have available?

You can use any number of different tools like the “Time Matrix” from Stephen Covey or a “Productivity Pyramid” to rank your priorities, but what I like to do is list my Top Three Tasks each day, as recommended by my Business Coach Dan Sullivan of the Strategic Coach. As Dan suggests, if I only get these three items completed, I’ve had a successful day.

Of course, this doesn’t mean you cannot do more tasks, if time allows, so I’ve got you “Overachievers” covered, too. If I have extra time, I may try to check off another small task, but the ultimate key is to maintain focus on what your highest priorities are, while not reaching a burnout phase.

Most important, as you go through this process, stay focused on your goal, track your progress regularly and celebrate your wins. Then, I will see you at the Finish Line!

“If there are nine rabbits on the ground, if you want to catch one, just focus on one.”

Jack Ma

Let’s take your business to the Next Level!

Are You Really Satisfied?

Are you truly satisfied with the progress you are achieving? If so, that’s good. However, I would suggest that it is okay to be satisfied and still want to accomplish more. The reason for this is simply that so many variables are changing constantly, leaving you behind if you don’t push forward to new levels.

The answer? Set new goals on an ongoing basis. Speaker Skip Ross suggested, “You have exactly what you want in life right now.” When I first heard his statement, I thought, “That’s just not true.” Yet, after thinking about it for a while, I realized he was right, because I wasn’t setting new goals and determining how I could get there at that time.

He offered a “Magic Formula” for achieving more:

Dynamic Living = (GGE + PS) X PSI

Very interesting. He added that Dynamic Living where you achieve higher objectives would only happen if you applied your God Given Equipment and what he called the Principles of Success, combined with a Positive Self Image…

Many of us don’t pursue new challenges (myself included) simply because of what others might think. So, what he is saying is to use all your talents, your thinking ability & your personal drive to initiate action.

Then, he suggested we use the Principles of Success, which he listed as follows:

  • The Law of Giving – “Whatever you give, that’s what you will get.” There are no free lunches. You always have to give something (e.g. effort & planning) to pay the price for success.
  • The Principle of Vacuum – “Get rid of what you don’t want, to make room for what you do want.” Get rid of the negative influences in your life and make room for greater achievements.
  • The Principle of Creation – I know you’ve heard me state this one numerous times in my blogs & articles. “Decide what you want, define it clearly, and write it down.”
  • The Principle of Visualization – “Look at what you want and picture it in your mind.” I would add: All the Time!
  • The Principle of Command – “Whatever you speak will be what happens to you!” Thus, always ask yourself, “Is that what you really want? If not, then don’t say it.” Don’t verbalize your fears to others, and, yes, we all have some of them… Ross adds that we spend 70% of our time talking to ourselves. Why not be positive?
  • The Principle of Action – “Do it now!”
  • The Principle of Discipline – “Do what needs to be done, when it needs to be done, whether you like it or not.”
  • The Principle of Persistence – “I will until…” Ross added that one of the shortest, yet perhaps the most effective Commencement Addresses ever delivered came from Winston Churchill, who walked onto the stage and stated, “Never give up!” He waited in silence for 30 seconds and said, “Never give up!” 90 seconds later, Churchill stated, “Never give up,” and then walked off the stage. As I suggested, while it was likely one of the shortest addresses ever, it was also one of the most effective ones.

Combine these steps with a Positive Self Image, and you will become unstoppable. Your self-image is a combination of your experiences and what you believe about yourself. Don’t sell yourself short. You can achieve anything you set your mind to. With that thought planted in your mind: What’s Next for You?

Please let me know if I can help you. You can reach me at john@success-strategies.com, and consider the following advice:

“Never give up!.”

Winston Churchill

Let’s take your business to the Next Level!

What Do We Do Now?

In my last blog, I discussed being willing to pay the price for success and what it will take if you want to consistently move to higher levels of achievement.

At the start of each of my Management Team & Finance Team Meetings, I like to begin by asking the following question: “What project or challenge is on the horizon for your operation this month?”

I recall an interesting meeting with a Client who told me he was behind with his feed company, the feed company was pressuring him to get caught up, and he needed to decide what to do.

Of course, he had two obvious options. He could panic or he could simply hide out, but neither of them seemed like particularly good choices. However, I suggested to them that they had two other positive options available to them.

  • They had a low fixed interest rate on their real estate loan, and it matured in two years. Given their low Loan to Value on that real estate loan, why not put a note payable behind the existing loan? It could mature in two years, at which time they would refinance the real estate loan anyway, either with their current lender or someone else. They could even keep the added loan payment small by amortizing it over 20 years and having it mature at the same time as the existing real estate loan.
  • The second option that they had revolved around the 10% “excess” heifers they were carrying. By selling these extra animals, they could generate $300-400,000 of cash and lower their feed expenses by raising less heifers. Most important, they would still have sufficient replacements to maintain their herd size.

The significance of this discussion lies with the fact that, while they had a challenge to overcome, they met it head on, and we identified options we could use to reach a greater level of success.

Option #1 was possible because we had been pushing the Loan to Value downward by making the regular monthly payments and, whenever possible, adding assets to the real estate that boosted its value. This provided us with the opportunity to acquire the second loan we needed.

Option #2 was available to us due to having an excellent breeding program and then always focusing on the question: “Based upon our financials, what challenge or project do we need to focus on this month?”

What is your approach in situations like this? Please let me know if I can help you. You can reach me at john@success-strategies.com, and consider the following advice:

“There ought to be ways of reforming a business, other than by merely putting more money into it.”

Winston Churchill

Let’s take your business to the Next Level!