The author, from Orefield, Pa., is a veterinarian with a master of business administration degree (MBA). He works with farm families on management, asset transfer, and communication skills.
The items listed below are actually important in good times as well as in bad, but become much more crucial when margins are tight. They also have a tendency to slip when managers get discouraged.
Take care of the basics — Some things just don’t change. Good forages, excellent cow comfort, sound reproduction, good udder health, healthy fresh cows, and effective calf and heifer programs are still the essentials of long-term success. Be sure to monitor these herd factors with meaningful numbers and make adjustments as needed. Use your advisers to help you find the “weak link” and then set realistic goals to strengthen that link.
Keep your faith, stay upbeat — “Yeah, right! Easy for you to say!” For those of you who answer with that, I understand. I am not personally dealing with a milk check too small to cover the bills. Yet, I also know that keeping your religious faith, whatever that may be, will help you get through. An overall positive manner will also help. A wise man once told me, “Most people are about as happy as they decide to be.”
Regardless of our circumstances, we can choose to be pleasant and relatively cheerful or to be grumpy and negative. Your “self-talk” can lift you up or pull you down. Your actual words and manner can inspire your family and employees to do their best or drag them down to just going through the motions. I urge you to try and bring out the best in them and in yourself.
Discount all of your bills — This is not an easy thing to do when margins are slim. Not taking discounts or, worse yet, paying finance charges, simply makes the margins tighter. If your cash flow is just not enough, talk to your lender about borrowing at relatively low interest rates to preserve your discounts and avoid finance fees.
A monthly cash discount of 2 percent is the same as 24 percent per year. A finance charge of 1.5 percent is 18 percent per year. So if you are missing a discount and paying a finance charge on a monthly feed bill of $5,000, then you are sacrificing $2,100 per year.
Meanwhile, the bank interest charge at 6 percent will be $300 on that same $5,000. If your financial position is so grim that your lender cannot work with you, then your future may be in serious jeopardy.
Use a profit team — Notice I said use it, not just have one. A small group of trusted advisers, who regularly meet to review your farm performance and then make suggestions, is extremely helpful.
Usually your veterinarian and your nutritionist are key members of the team. You may add your banker or accountant, county agent, or any other trusted person who cares about you and your farm, and who has useful knowledge. Key farm employees also belong. One person needs to serve as facilitator to keep the team on track and to hold individuals accountable. If you do not have a profit team, get one started soon.
Focus on what you can change — This is a big one. Early in my career I noticed that some of my clients devoted all of their conversation to complaining about others. Politicians, the co-op, and service providers . . . all provided too little value, and all were overpaid. I imagine when these producers talked to others about me, I was put in the same category. In general, this group of clients never seemed to make much progress.
Other clients seemed to be unconcerned with what others did or did not do. They wanted to talk to me about their farm, especially how to improve. They sought my opinion on production, somatic cell counts, breeding performance, calf health, and many other subjects. The common theme was how could they improve?
These peoples realized that it is a waste to spend time, thoughts, and energy on things over which they had little influence. They know where to devote effort to make change and used their time with me to address those subjects.
Know when it is time to quit — This is probably the most difficult question that a dairy farm must ever answer. Whether you are going deeper in debt, or simply seeing equity disappear, there comes a time when it is best to let the cows go.
Forty years ago things were the same. I worked with a young dairy farmer who decided to quit. A few years later he was managing and working hard in another business but was making a profit that had eluded him as a dairy farmer. He was happier, and his wife was a whole lot happier. They are still operating this other business today, being successful and well-respected in their community.
There is no dishonor in making a decision to pursue another type of work besides dairy farming. Do not let pride or family history keep you from doing the right thing for your family today.