March 19 2012 08:01 AM

Ask yourself, how do we analyze the dairy business? And, how are we changing over time?

Financially, every business, whether it is dairy related or not, faces an array of challenges and opportunities that impact profitability and future success. At the 2012 Northeast Dairy Producers Association Conference, Jason Karszes, with the PRO-DAIRY program, shared six categories of metrics every dairy should be critically evaluating today or preparing to think about tomorrow.

Activity analysis – breaking the business enterprise down into the activities that are taking place:
  • What is the performance?
  • What is the cost?
  • Can we achieve the same performance at a lower cost?
  • Can we perform better with the same costs?
  • How much better do we need to perform to justify additional costs?
Employee management – managing the managers:
  • How well do middle and senior management perform?
  • How do you attract and keep the people you want?
  • What impact does or will this have on costs, decision making, and your business structure?
Capital investment – improvement versus replacement:
  • Are you offsetting additional capital investment with earnings?
  • Where is your next improvement in milk production efficiency, labor efficiency, or earnings?
  • Can you afford to just replace without improvement while prices for capital purchases, such as equipment and machinery, are rising faster than the rate of inflation?
  • How can you dilute overhead costs?
Multi-site management:
  • Where will your next growth in earnings come from?
  • What is the next step for the business?
  • Can you generate profits on your own or do you go to a new site with new partners?
  • What needs to be in place for you to be successful?
  • How will an additional site change roles and responsibilities?
  • How do you transition from doing it all to managing and leading others?
Transition of management, leadership, and equity:
  • Who will lead the successful farms in the future?
  • What will happen to today's successful farms?
  • How will we transition management and leadership to the next generation?
  • Who is the next generation?
Managing variability: a new focus area:
  • Can you, should you, how do you self-insure?
  • Are we making a profit over time?
  • When does the use of risk management tools make sense and what tools does the industry need to develop?