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Of course, the answer is “Yes!” We all do, but now that I have your attention, let’s talk about the opposite position. Do you have any good habits?

Once again, the answer is “Yes.” Of course, you have some good habits. I do as well. I track my weekly results on multiple key measures, I call my adult children at least weekly, my son and I are going through a Napoleon Hill study weekly for all of 2021, and I try to sleep eight hours per night.

Do I succeed all of the time on each of these items? Not quite. However, I typically get very close to 100% on these and several other measurements each week. One of the most positive discoveries I’ve made throughout this process of developing these habits is that I have created a “System,” through which I am able to typically complete them in a timely manner, and if I skip a day on any of them, I actually notice the difference in my performance or outcome.

These are some of my business and personal habits that are creating positive outcomes. Now, I’d like you to think about some in your life and business. Please allow me to give you some examples from a recent Client meeting I had.

This Client, a mid-sized dairy operation, has had a solid history of profitability over the years, but their milk production had plateaued, and, on some days, it had even fallen off considerably. During our discussion, it became clear that, with the labor challenges all operations are currently facing, several tasks just weren’t getting completed consistently.

Free stall beds were not getting raked daily, and feed was not being pushed up regularly. Now, we wouldn’t consider skipping a day of milking the lactating cows in the herd, and we wouldn’t skip breeding cows for several days. So, why skip the other management routines that are so crucial to high production?

The primary problem in both of these areas was a lack of training. With all of the employee turnover this Client had experienced over the past two years, new employees were not always aware of what they should have been doing. It took some training and teaching one employee how to drive the tractor to push up feed, but it is now working.

What was the key to this improvement? A “System,” based upon a foundation of good habits. Raking the free stalls daily, pushing up feed every three hours, 24 hours per day, and several other managerial tasks are what will help take your operation to even greater success.

Create your list of tasks (habits) that need to be completed to develop a system in your operation today. When you make a concerted effort to do this and get it written down, you, too, will notice it when any of these items gets overlooked. However, when you’ve created a “System” of good habits, you will then know exactly what to do next!

Let’s take your business to the Next level!

This was the question I was asked when I met with Jerry for the first time. Our discussion was by phone, but I can imagine the look on his face when he asked me this. The question that I had asked him was “What are your Break-Even Levels?”

Surprisingly, this is one of the most important items to know in any business. However, it is also probably one of the least understood concepts. Essentially, it is the Price Level or Cost of Production that needs to be achieved in order to not lose money, if all other variables remain the same.

Looking at the Chart below:

Actual        
12 Month Totals
Feed Expense/Cow/Day  $                    5.93
Feed Expense/Cwt  $                    9.21
Net Milk Price/Cwt  $                  15.86
Income over Feed Cost  $                    6.65
Breakeven Levels  Breakeven Levels
Milk Price (Net)  $                  15.54
Feed Expense (cow/day)  $                    6.14
Feed Expense (per cwt)  $                    9.53
Production (#/cow/day)                      76.45

This producer is feeding his cows for $5.93/cow/day and has been making money. You can also see that his Feed Expense per cwt is $9.21, which, given his Net Milk Price/cwt of $15.86, provides him with an Income over Feed Cost of $6.65/cwt.

Next, you can see his Break-Even Levels in the bottom half of the chart. If all the other variables stay the same, his Feed Cost per cow/day could rise to $6.14 and he would still break even. We know that he is currently making $0.32/cwt, because we know that this is the amount that his milk price/cwt could decrease ($15.54 minus $15.86/cwt) or his feed cost/cwt could rise ($9.53 minus $9.21/cwt) and still allow him to reach break-even.

What value is there in knowing this? I’m glad you asked. Knowing this will allow him to understand what changes he can make or, in the case of cost increases, what increases he can withstand and still not lose money. This information is also very useful to him in understanding where he may want to set his price floors within programs such as the Dairy Revenue Protection Program. This program, for example, is designed to assist producers to place a profitable floor under their milk price. Knowing your break-even levels is the only way to use this type of program successfully. This is what makes knowing your Break-Even levels so significant. Can I help you with this?

Want to learn more? I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing this through Zoom Group Sessions.

Let’s take your business to the Next Level!

In my last blog, I suggested that one of the key steps to achieving successful results in your operation is measuring your Net Cash Flow each and every month. I am such a firm believer in this process and its numerous benefits, that I complete it monthly for every Client.

Why am I such a huge believer in the benefits of this process? Yes, it provides us with a clear indication of whether you are making money or not, but it also has other benefits. It will help you steer clear of any financial “surprises” such as getting to the end of a quarter, or worse yet, the end of a financial year, only to be shocked by how much a particular expense item went up. Rather than being forced to explain this to your banker, wouldn’t it be better to catch this sooner and correct it before it becomes an issue? I see this as one of the largest benefits of regular Cash Flow Analysis.

If you think about it, this type of financial hurdle will also be easier to correct if we catch it early. If some expense is out of line six months into the year, it can present a real challenge to get it back into alignment before year end.

In the Cash Flow Analysis that I provide my Clients, there are other items that can prove to be beneficial. The Variance from Budget can clearly be good information to have at hand, i.e., how large of a problem is this variance.

I also feel it is helpful to know what your Break-even levels are for milk pounds per cow per day, feed costs and milk price. Essentially, these tell you how much improvement you need to make to get back on track financially. This information can be essential to your overall game plan and success.

I often see this demonstrated when producers go from 70-72 pounds per cow per day to levels above 80 pounds. Sometimes they worry that their feed cost per cow per day may go up fifty cents, say 6%. However, at any given milk price, your revenue should increase by 11% (80/72 e.g.), representing a healthy marginal improvement.

Additionally, as you make more hundredweights of milk, you will also notice another benefit. The Cost/cwt for every one of your Fixed Costs will also improve. This can provide you with a considerable improvement to your Net Margin, and that, my friends, is the name of the game, when it comes to Cash Flow Analysis.

If you would like to learn more about Cash Flow Analysis and take full advantage of this process, just shoot me an email stating “NLT Workshops,” and I will be sure to include you in future invitations.

Let’s take your business to the Next Level!

I recently had an excellent discussion with one of my Clients about how the last 12 months had turned out. As many of you know, early 2020 presented an incredibly challenging time with the onset of COVID-19 and its extremely low milk prices, particularly during the second quarter.

However, he had maintained his production levels, despite the fear in the markets, and it had paid off. He was solid on his Cash Flows and the details of his herd management, but then at end of his year, he seemed to “take his foot off the gas…” Maintenance of his facilities seemed to fall short of their normal levels, and milk quality started to suffer.

When I asked what had happened, he seemed a little defensive. However, helping people stay on their “A Game” is part of what Clients pay me for. Then, he informed me with the following: “John, I’m tired. My employees are exhausted. These last 12 months have been very taxing.”

Believe me when I say that I did, indeed, understand. I had overcome several serious Client challenges on the banking front, facing off against some of the most ridiculous financing challenges I have seen in 23 years of consulting. However, I worked with my Team and my Clients to overcome those hurdles.

You know what made the difference? We “played all four quarters!” Every game is won or lost in the fourth quarter. You can plan an excellent game for three quarters and then lose it in the fourth quarter. Guess what? It is no different in the dairy business. You must play all four quarters each & every year. Defeat and its willingness to take you down is on call all the time, just waiting for you to let up the slightest little bit!

I want to encourage you to “fight the good fight,” and I mean all year long. Here are some suggestions for “winning the game” by playing all four quarters:

  1. Complete regular monthly Cash Flow Analysis, not just occasionally, but each & every month. My Clients see this information from me every month. There is no better way to stay ahead of the game. While I am an advocate of regular quarterly CPA prepared Financial Statements, a lot can happen in 91 days. I want to catch any expense items that are getting out of control before they get “beyond repair.”
  2. Regular Management Team Meetings – These should be held with your Financial Advisor, Nutritionist and Key Employees on a regularly scheduled basis. As I said earlier, you have to play all four quarters to “win the game.” However, you also have to have a winning team, all of whom are pulling in the same direction. If they are out of sync with you or each other, this can create real challenges to your overall success.
  3. Regular Finance Team Meetings – These can be crucial to making sure that your Team stays on track. Measuring your Cash Flow monthly is one thing, but making sure that your Team is aware of challenges that arise is crucial. How can we expect them to keep costs in alignment if we never share our concerns with them?
  4. DMC & DRP – These programs are, simply stated, a “form of insurance.” Like any insurance program, they provide you with a safety net against any severe downturn, in this case a falling milk price, which, of course, can wreck your Cash Flow. Think of these safety nets as an investment, not a cost. Just as you would not call your insurance agent at the end of a year & and complain about the premiums you had paid, although your house didn’t burn down, you likewise shouldn’t complain about these premiums. Both DMC & DRP are a form of financial insurance.

I hope you’ll consider playing all four quarters this year, even the frustrating ones, because that is the only way for you to WIN!

If you would like to learn more about these concepts, just shoot me an email (john@success-strategies.com) stating “NLT Workshops,” and I will be sure to include you in future invitations.

In previous articles I have often stated that if you measure something, you can understand it. If you understand it, you can control it, and of course, if you have the ability to control something, you can then improve it!

Please take a moment and consider the possibilities of this acronym – MUCI… Its benefits are unlimited. Just think about any item that you measure in your business. Again, if you take time to measure it, you undoubtedly will better understand that item. If you understand it, you will be more empowered to gain control over it, i.e., adjust it to your advantage. Finally, once you fully understand this item and gain some control over it, you will have the ability to improve it. That is where the fun and excitement begin!

We recently ran a summary of our Dairy Clients and their results for the last four years. We have been measuring Cash Flows on some of them for over 15 years now, but we simply looked at the last four years on each of them to obtain a comparative set of results. Now, these operations are quite variable in terms of revenue, but the most noteworthy observations include the following:

  1. Every one of them has experienced upward pressure on many of their expenses, particularly Labor, Supplies and Repairs & Maintenance Costs.
  2. However, all of them have boosted their bottom-line results, some by as much as $3.00 to $4.00/cwt of milk. Part of this is a direct result of improved cost controls, and in several cases, it was due to actually putting some items out for competitive bids… Imagine that!
  3. With a couple Clients, we were able to “discover” additional sources of Revenue they had overlooked previously. In one case, this, combined with a decrease in their interest expense, boosted their bottom line by over $3.00/cwt, vastly improving their Break-Even levels!

Ultimately, to answer the question in the title above, this is “What’s Up.” This same resource is available to you in your business, regardless of your industry. My Business Coach Dan Sullivan states that: “Our eyes only see what we are looking for…,” and that’s what makes this process so valuable. It can definitely boost your profitability and better equip you to use tools such as the Dairy Revenue Protection program, using your actual numbers rather than just plugging in industry averages.

If you would like to learn more about this tool and take full advantage of this process, just shoot me an email stating “NLT Workshops,” and I will be sure to include you in future invitations, as outlined below. Want to learn more? I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. Let’s take your business to the Next Level!

Jean-Baptiste Say was a French Economist who lived from 1767-1832. He was best known for his Theory of Markets and their relationship to entrepreneurs. His Law of Markets holds that supply creates its own demand. For example, before the cell phone was created, did we know that we needed one? Not likely. However, once the i-phone or Android versions were created, our demand for them has grown immensely.

He goes on to expand his theory by generating three primary questions, as outlined by my own Business Coach Dan Sullivan, Founder of The Strategic Coach:

  1. “As an individual entrepreneur, what are your personal resources that can quickly be taken to a higher level of productivity?”
    1. In essence, are you using your expertise/skill set to your maximum advantage? Are you spending 100% of your time “in the business” doing daily activities, or are you investing part of your time “on the business” planning your future course, as well as tracking your YTD progress both financially & in terms of business efficiencies?
    1. The interesting thing is that, regardless of your business size, the most optimal approach can yield large dividends, whether your revenues are $4 million or $20 million annually. I’ll have more on this in my next blog.
  2. “As an entrepreneurial company, what are your organizational resources that can quickly be taken to a higher level of productivity?”
    1. Are your people being maximized? Is automation a possibility for your operation? I had a Client whose fruit packing facility was able to go from 10 to 4 employees with only partial automation. I also had a dairy Client whose milk barn automation, using robotics, allowed them to go from six milkers down to just two plus a part time relief person.
    1. The paybacks on these changes were huge, while also relieving the owners of considerable management time & effort.
  3. “What are your… resources that can be quickly taken to a higher level of productivity?”
    1. Can your land & buildings be used differently? Do you even have some that are currently idle?
    1. With some simple changes, can we generate higher levels of productivity?

Take some time this week to think through some of these potential changes in your business. While some of them can be scary, the results you can achieve are often just what your business may need to get to the “Next Level!”

I’m sure you are familiar with the S-Curve concept that describes the development of a product, or for that matter, just about anything. You know – first the product is introduced, it develops slowly, and then suddenly (if it has merit) it takes off in an upward trajectory until it is eventually replaced with a better product & it fades into obscurity.

I recently read an article in Inc. magazine by Magnus Penker, CEO of Innovation 360, within which he explains that the key to success in business is to consistently leave the S-Curve that you are on for a newer, better one, prior to your current one entering that “flat stage” at the end of its life. In other words, he suggests that we must “Innovate or Die.”

While that concept may sound scary, especially if you haven’t done much innovating recently, I think it’s more important that we remember that the rules of business have changed. We are under much more pressure to boost efficiencies, reduce costs or simply streamline our processes. The key, as Penker points out, is to prolong your current S-Curve as long as it continues to be beneficial, but not beyond that point.

Think about anyone in your industry who has recently gone out of business. Did they innovate or simply do the same things in the same manner because, “We’ve always done it that way?” On the contrary, Penker states: “To prolong the life of your S-Curve, you’ll need to employ incremental innovation, which is all about improving current products or services, enhancing their features, or lowering operating costs.”

He goes on to say, however, that the challenge of generating these incremental improvements may leave you vulnerable to sudden, unexpected shifts in your market. The key is to experiment with new ideas that you can learn from, without severely damaging your future. Of course, this also needs to be offset with the ever-rising need for change.

Finally, he asks: “How will you change the world?”

Once again, using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you remains:

“What innovations do you have available to you right now to boost the productivity of your business (… and transition you to the next S-Curve)?”

If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!

I’d like to invite you to join me for our upcoming Next Level Thinking™ workshops later this year, within which, I’ll continue to focus on the benefits of this type of proactive thinking. We’ll be doing portions of this process through Zoom Group Sessions, with monthly follow-up calls on an individual basis. Let’s take your business to the Next Level!

Wow! My Client was irate, possibly just plain hurt, by the negative commentary. As you know, the years of 2015-2018 were tough years for profitability in the dairy industry and some other agricultural sectors as well… He had met with his loan officer, and despite being profitable in both 2019 & 2020, this is the message he caught: “You are a problem loan!”

What? Problem loan customers don’t show profits for two years in a row, reduce their Accounts Payable by over $200,000 and also service their debt structure as agreed. Oh, and did I mention that the Client’s Loan to Value was 60% on his herd loan and 80% on his feed line, along with an excellent diversification plan in place?

The point is this. If we had been playing football, the loan officer would have been flagged for unnecessary roughness! I understand that being a loan officer is not an easy task, but being one also doesn’t give him or her a license to be a butt-head either… The job isn’t that difficult. I know, because I did it successfully for eight years. My message for this loan officer is one that comes from former President Teddy Roosevelt, who said:

“Complaining about a problem without proposing a solution is called whining.”

Now, more significantly, what can you do, as a borrower, to avoid being the recipient of such “unnecessary roughness?” I’d suggest the following items, which this borrower had already put in place:

  1. Monthly tracking & reporting of Inventories & Accounts Payable.
  2. Monthly Cash Flow Analysis of your operations. Remember, if you measure it, you can understand it. If you can understand it, you can control it, and if you can control it, you definitely can improve it!
  3. Regular CPA Prepared Financial Statements, at least 2X per year.
  4. Positive goals that seek to boost profits long term.
  5. A Diversification Plan in place to survive the downturns.
  6. A Plan that includes opportunities to evaluate, adjust course and implement the process.

Following these steps doesn’t guarantee that you won’t become a target of “Unnecessary Roughness,” but I assure you it will prepare you for greater levels of success and the ability to stave off any success comments.

I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll start my focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way prior to that, please reach out at john@success-strategies.com or at 209-988-8960.

I recently completed an outstanding book entitled Upstream, which was written by Dan Heath. He is a Senior Fellow at Duke University’s CASE Center and has co-authored a number of excellent books with his brother Chip. You may even recognize some of them: Made to Stick, Switch, Decisive, and The Power of Moments. I’d highly recommend that you read this book in the near future.

See if you can relate to his opening story in Chapter 1.

“You and a friend are having a picnic by the side of a river. Suddenly you hear a shout from the direction of the water – a child is drowning. Without thinking, you both dive in, grab the child, and swim to shore. Before you can recover, you hear another child cry for help. You and your friend jump back in the river to rescue her as well. Then another struggling child drifts into sight… and another… and another. The two of you can barely keep up. Suddenly, you see your friend wading out of the water, seeming to leave you alone. ‘Where are you going?’ you demand. Your friend answers, ‘I’m going upstream to tackle the guy who’s throwing all these kids in the water.’”

A public health parable (adapted from the original, which is commonly attributed to Irving Zola)

This is a great example of “Upstream Thinking.” Have you ever noticed that we seem to spend a lot of time and money “fixing” problems, essentially those challenges that we are seeing “downstream” in our business? As you’ve heard me state many times, I firmly believe the following:

  1. If you measure some item in your business (e.g. Cash Flow), you can indeed understand it. It equips you to catch severe cost increases quickly before they get out of hand. Since these changes directly impact your break-even levels, they flow directly toward the “bottom line.” As I’ve said before, you can also use these cash flow measures to set your milk price floor within the Dairy Revenue Protection program.
  2. If you understand your cash flow, you can control it. You’ll know exactly what steps to take to positively impact it. Looking at your break-even levels, you can determine just exactly what changes you need to make in order to achieve improved profitability.
  3. Finally, if you can control it, you can improve your cash flow results. Isn’t that the objective of every business operation?

Well, whenever we identify a measurement that appears out of control, we should consider if we can go one step beyond this “downstream” measurement. Can we move more “upstream” and determine what is actually causing our problem? Here’s a simple example. Recently, one of my Clients was faced with higher than normal calf losses. These higher losses were the “downstream” measurement. At first, we thought that it may be due to changes at the calf ranch. However, as we moved “Upstream,” we determined that the machine used to pasteurize the colostrum being fed was only functioning at 60% efficiency. In other words, 2 out of every 5 days, it was not working correctly. This may shock you, but the employee that ran the faulty equipment noticed that it seemed to be failing. Unfortunately, he never bothered to tell anyone else. Hence, the challenges that arose “downstream.”

I’m sure you can think of other possible areas in your business that seem “off” in some respects, whether it’s a higher than normal “Cost/cwt” or another “Efficiency” measure. I would invite you to join me as I start to continually move my Clients “Upstream” in the next 12 months. Until then, what items in your operation are seemingly “out of kilter?”

Going back to the original question, “Would You Meet Me Upstream?” please give some consideration to this new type of thinking. It definitely will make a huge difference. If I can assist you with this process, please contact me at john@success-strategies.com or 209-988-8960. Best Wishes for a joyous Holiday Season and continued prosperity in the coming year!

Hopefully, I caught your attention with this question. Please allow me to explain. Read on & see 3.a. below. Cal Newport in his fantastic book Deep Work defines “Deep Work” as:

 “…the ability to focus without distraction on a cognitively demanding task. It’s a skill that allows you to quickly master complicated information and produce better results in less time. Deep work will make you better at what you do and provide the sense of true fulfillment that comes from craftsmanship. In short, deep work is like a super power in our increasingly competitive twenty-first century economy.”

As you attempt to wrap up 2020 which has, at times, been very challenging, this focus on “Deep Work” becomes very crucial. Here are a couple of questions for you to consider as you strive to finish strong this year:

  1. What items went right this year? We probably all tend to dwell on what items went “sideways,” but think about and write down what went well. Was your production per cow better this year? Could it be, going forward? What’s your profitability look like, especially in light of the CFAP money from USDA? Are your 2020 costs in line? How about Labor costs? Did your 2019 investments pay off? What else would boost efficiencies?
  2. What needs to change? Are there better cost controls you need to put in place? For more on that specific topic, please see my October 14th NLT blog entitled “Why Bother?” Do you need to maximize Labor Efficiency, i.e. become more productive, especially in light of rising labor costs? How about your debt per cow, especially as we consider the strong possibility that, at some point in the future, we will see lower milk prices…? Do we need to decrease your debt levels?
  3. Most important, ask yourself, What’s Next? Treat this like “Deep Work,” because that is precisely what it is. My recommendation includes the following:
    1. Go Away! No, I’m not telling you to get lost. Just simply get away from your everyday distractions and do some “Deep Work” on your business, using the information above as a guideline.
    1. Focus on what, specifically, you want to see next year! Yes, I know it’s only late October or early November as you are reading this, but soon the Holidays will be upon us, and will you find time then? Not likely…
    1. While you are in solitude & focused: What specifically do you want to accomplish next year? Who is involved? What steps do you need to take? By when? Do your proposed changes require some financial analysis? If so, please contact me if I can assist you.
  4. Take the time to focus on this “Deep Work” now. Your future success depends upon it!

If I can assist you with any steps of this process, please contact me at john@success-strategies.com or 209-988-8960.