Archive for Financial Managment

We all want to pay our bills. After all, most people don’t get a great feeling watching debts accumulate. But things happen unexpectedly and, suddenly, you can’t make payments for everything on time.  Although you need to correct things quickly, making an ill-considered decision may mean wasted speed and wasted money!

When milk prices decline, the quickest response is to immediately cut an expense! 

Most often, somebody else’s bill becomes the first target: vet; nutritionist; feed supplier. What may be overlooked in this quick decision, are the positive ways these providers and consultants can contribute with solutions for the tight cash flow problem. It is short sighted to think that changing nutrition or health from monitored and managed to least cost or elimination will be the best decision. It is in everyone’s interest to work together to make the dairy profitable.

“My Business is the First Priority.”

Take note the important word is “business” not “bottom line.” Although the two may seem inseparable, a well-run, well-planned dairy business always comes ahead of dollar based decisions only.  Focusing on how you run the dairy will absolutely pay off to the bottom line.  Focusing on the bottom line could mean a savings today that is irreparably costly tomorrow. If you choose to cut something out of the chain, you may also be cutting profits due to losses from sick or dying animals and the resulting lost production and expensive solutions.

Everyone in the barn lane …. better be prepared!

This is not to say, that everyone in the dairy lane should be kept on your team. You want your cows to produce.  Your consultants and suppliers should contribute to that goal too. Let’s look at bills from both sides now:

The Nutrition Bill:

Engage a nutrition company that is willing to work with you not simply there to sell you product.  Make sure the nutrition company has a proven track record with dairies your size. The biggest is not always the one interested in solving your problems.  Find a nutrition company who has a person willing to check every cow – in the pen – from input to output, including manure.  You want to be presented with choices that have actual measurable outcomes, beyond the quick, “our price is lower!” answer.

The Vet Bill:

On the one hand, if the bill hasn’t changed much it may seem to be the easiest to complain about and then the easiest not to pay!

On the other hand, if the vet bill is actually higher than it’s been before, finding the reason is crucial, or you could be throwing the baby out with the bathwater.  It’s one thing if a business is solving its own cash flow crisis by charging higher rates, but if there are rising health issues or ongoing medication or medical emergencies, these need to be identified with both action and financial planning. Sometimes it’s a talk about brand versus generic medicines. Perhaps it’s as simple as reducing the age at first calving.  An example recently cited a dairy farm where age at first calving was 28 months.  The suggestion given by the vet was that lowering that number to 23 months would pay the vet bill for an entire year. What can you do better?

Are you Saving Money to Lose Money?

Perhaps you haven’t cut out the expertise on your team, maybe you have inserted your own.  When saving money, sometimes it seems that I did it myself is a good solution.  Some dairies mix own detergents, teat tip, pipeline cleaner.  Great!  If it works!  However, if the SCC raises the dominoes mentioned earlier start falling: SCC rises and you don’t get premiums

Don’t Get Caught up in the least Cost Solutions

Don’t get caught up in finding least cost solutions: whether they are yours or someone else’s. You decide to make little changes … cut back a couple of steps in corn growing schedule … less yield.  Lower quality corn silage …. Once again the dominoes start falling as a monetary cut back in the spring could cause significant financial losses during the winter.

What Effect is Loyalty Having on Your Bottom Line?

Every dairy farm has loyalties.  Those include a best friend, twenty years or more of service, a hunting buddy or a next door neighbor.  These can all be rewarding but let’s look through the lens of business. It all comes down to cash flow and the bottom line.  Goods and services are on the expense side of the ledger, and every manager must determine if loyalty is maximizing or draining this return over cost.

A sound financial plan will identify both sides of this relationship: “whom do you need the most?” and “Who needs you the most?” Write each supplier line down and assign a priority: labor, vet, nutritionist, feed supplier, equipment supplier.  Which ones are first and last on the list of improvements you a targeting to improve your bottom line.  Do you have every latest product line or piece of equipment from the supplier you’re loyal to?  What does it cost you?  Is there a way to balance what you are buying with the effect it has on making you more efficient or productive?  When was the last time that a consultant suggested modifying or cutting back to get through a downturn? Again… these must be measurable results, not just heartfelt feelings.

Whom are you Going to Cull? Do you keep Unproductive Cows Too?

It is perhaps easier to cull people sending bills to your inbox than it is to cull cows in the milking line. However, both are an important part of your cash flow (story).  Herd turnover and the milk quality produced not only affects the price received for the milk you send out, it financially impacts every step from calf to the milking line. How much money are you spending on raising calves that will never produce?  Consider all your options from breeding programs and sexed semen to setting up defined culling strategies.  Put your money where the milk is long before the animal is in the milking line.

All cows are not created equally profitable! All numbers are not created equal.

Don’t live or die, meaning kill your business, by blinding maintaining some magic number of total cows on your farm. Are you keeping everything to maintain a number that you consider ideal?  A pen of sick or low producing animals is costly.  Not only because of the effect on the net return over feed per day but also because of the potential for sharing their diseases.  Furthermore, the time and attention and FEED took away from better-producing animals is money and time wasted.

Planning for the Future means Planning to Survive.

In every business success hinges on finances.  You may be willing to have a less flashy lifestyle, but you must always pay the bills.  How can you generate more income?  How can you hold costs under control?  Revenue maximization is a planned response to both rising or falling milk prices.  It is a major challenge. The up and down cycle of change occurs every two or three years.  Producing a product that garners a premium is one of the few ways a producer can affect the milk price received.  Having a plan in place for both events is the only way to manage this volatile business.  Following a plan, will make surviving any crisis more likely.

The Bullvine Bottom Line:

Suppliers, vets, and consultants have bills to pay as well. Nothing in the dairy industry happens in a vacuum. If everyone reduces feed supplies, stops vet visits and decides to put the cows on a “recession diet,” the domino effect will go into play.  Soon there are expensive health, feed, and sourcing problems, that are even more costly than the initial lower milk price or cash flow crisis that prompted the short-sighted response. Everyone in the dairy chain benefits from looking at diary bills from both sides now!




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Dairy farm businesses are under extreme pressure. Producers everywhere are looking to boost their profitability wherever possible.  When it comes to growing profitability, the goal is to use simple, common-sense tactics for cost savings that go directly to your dairy bottom line.

Forget the TOP Line – YOUR Profitability starts on the BOTTOM Line

Too often we mistakenly focus on the topline (gross revenue, sales, even wins in the showring). That is costly and pays attention to the wrong end. Start by looking to the bottom line. The bottom line focuses on expenses. Not just the cost paid out but the benefits gained. And remember it’s the little things that count – a ten percent increase in profit is more likely to come from twenty things that contribute one-half percent each than from one thing that gives you the full 10 percent.

Here are 12 tips to start you on your way to a better bottom line and more profitability.

  1. Bottom-up budgeting. The first thing to think about is the net that your dairy enterprise must earn. Everyone involved in the dairy needs to contribute to this investigation of what is absolutely required to sustain a profitable operation. Communication of successes, challenges and future potential must be openly communicated. One of the primary advantages of bottom-up budgeting is that it is traditionally very accurate. As long as everyone takes care to look responsibly at their area of the operation, it will generally come out with an accurate estimate of costs. It is important that all input be received – without padding.  Accuracy gives the foundation to build on. Padding could defeat the whole purpose!
  2. Set targets and achieve You need to be looking at key performance indicators (aka KPIs) and measuring your dairy against them. It is essential to know what you are comparing to so you can work towards it. . When possible, try to quantify the results you are aiming for with quantities, percentages, dollars or time. This will allow you to measure what you have achieved and readjust accordingly. Ideally, you should set goals for the long-term, and then mini goals that are short-term and ultimately tie in with the bigger picture. Differentiating between the two will help you from becoming overwhelmed or discouraged, and will also assist in always keeping the long-term perspective in mind when the day to day threatens to make you lose sight of it.
  3. Make sure the goal is in the right hands. This means the goal must be achievable as a result of your own hard work and determination, or with the willing assistance of someone already in your network. If you have no control over the outcome, it does not make for a realistic goal. Everyone has a role in meeting goals. Each individual, each team and every dairy animal will contribute to the bottom line profitability if they are assigned measurable goals that are linked to that outcome. In order to increase motivation, employees need to be allowed to participate in the goal-setting process. With agreed upon actions and measurable outcomes everyone can identify how their contribution contributes to the success of the dairy operation. Most importantly, when approaching completion of a goal, set a new one.
  4. Beware of false savings. When times get tough, it is tempting to cut back on expensive inputs. Fertiliser or other soil treatments might go on the chopping block. Grazed pasture is the cheapest feed for dairy cows.  When ensiled for the winter it is the lowest cost feed. Saving on crop input costs could indeed be false saving. A better way of saving money would be testing soils tri-yearly and applying the right quantities of slurry, farmyard manure and fertiliser. False economies are everywhere, and the way to avoid them, as much as possible, is to take a strategic approach to thinking through them. Economies of taking away feed additives; doing without automation or adding more free labor (i.e. family) could actually cost more in the long term.
  5. Shop around. Make sure you get three quotes for everything that is purchased for the farm. Don’t forget to look at electricity, labour and even borrowing money. Getting quotes from power companies is easy, or you can use a broker. If you use self-employed labour or a contractor getting quotes can be appropriate or comparing other affordable options. Quotes for money means, simply, talking to other banks than your own. It’s in your profitability’s best interests to compare all suppliers on the basis of price, capabilities and performance. It’s false saving to have a cheap price that doesn’t provide results (see #4).
  6. Milk your milk check. Depending on particular countries, provinces and states .. there are many different rules to meet in order to receive your milk check. It is in your profitability’s best interest to increase the milk price in whatever ways are available to you. Take advantage of all the bonuses available. That could be for butterfat, protein, quality or pattern of supply. Seasonal incentive pricing exists in many areas so take advantage of it also!
  7. Make good on your grazing. Some advisers suggest that now is the time to intervene if your grass is not at its best. With half the season left you could still fix it. Mow and either feed the grass or bale Fertilise the field and get it back in the grazing rotation within 30 days. Also reconsider those late cuts. They are always more expensive to harvest as silage, so graze it or make dry bales to reduce costs.
  8. Manage the short term AND always make sure you have a plan B in every scenario. A plan is the one which has been put on the piece of paper. If it is not on the piece of paper, if it is not in black and white then it is just some random set of ideas and not a If you are really serious about creating a profitability plan, you will make efforts to write it down somewhere and share it with others. Of course, just writing your plan down on paper won’t make it “profitable”. But it is a good start.
  9. Always be better. In many countries, dairying is definitely seeing difficult times but that doesn’t mean there aren’t opportunities for improvement.Set some goals for changes that you want to make to your dairy ­
    1. Continuous improvement should be the number one “VALUE” of the profitable dairy operation.
    2. Continuous improvement is linked with rewards and recognition.
    3. Continuous improvement should be supported by continuous training that is measured for effectiveness.
  10. Calculate the ROI of everything you do. ROI is a more important metric than any conversion rate simply because it takes ‘COST’ into account. As long as you take ‘Cost’ into consideration, you can’t go wrong with improving your business bottom-line. Calculate ‘cost per acquisition’ for all of your dairy (show string; advertising; genetics). Even calculate ROI of all of your meetings, business travel and lunches. What about the days it takes for you to do all your accounting? Equipment repair? Building maintenance? Does your milk production suffer when you have to wear one of your other hats? Vet? Office manager? Field manager?
  11. Hire an Expert. There is always an opportunity – lost or gained – when you choose to do things yourself in which you are not an expert or when you hire someone who is not an expert.
    While you may gain by not writing a check to someone else, you could still be putting money down the drain. When your bookkeeping, animal health protocols, feed supplies or equipment maintenance are sub-par, any one of them could be substantially reducing your bottom line and be costing you your time, your health, mediocre results and even complete failure.
    Hiring an expert may not be profitable at first but, in the long run, can be the best bang for your buck. Not only will you recover your entire hiring cost sooner but you will also make a lot of money on top of that, and you will continue to do so for an extended period. However, all of this can happen only when you first understand that you can’t be an expert in everything and that you need someone who is really an expert in their field.
  12. Manage for Improvement. Efficiency is gained when revenue per cow grows.  Technology, genomics, robotics all are tools, so your herd can become more productive and you don’t have to add new headcount to grow.  What if you could replace your lowest 10% of performers with new cattle that matched your top 10%?  This would result in an enormous productivity boost at virtually no incremental cost.  There are many techniques to improve productivity, but the point is that constantly growing headcount certainly will result in overhead growth but won’t necessarily lead to profitable revenue growth. Focus on acquiring or raising only the best animals. Your best milk producers are your most profitable producers. If you don’t know your best producers yet then get to know them ASAP. If you don’t know which animals are driving up expenses …. Find out ASAP. According to the Pareto Principle (also known as the 80–20 rule), 80% of your costs come from 20% of your herd. These 20% of your herd are hurting your bottom line. The other 80% are your high-value You need more of these best producers to improve your business bottom line. So gradually start reducing your herd of those high expense producers. Aim to breed more cattle targeted at reducing your most limiting genetic factor or factors (reproduction, feet and legs, calving ease).  It is not really rocket science, but some dairy business owners and managers just don’t get it. They remain busy in acquiring low-value animals because they have never made the effort to identify and target their best producers.  Low-value producers — still produce milk — but all milk isn’t equal.  Even though it’s all the same once it’s in the milk tank, there can be quite a difference in the cost that got it that far. The lowest producing cow in the milk line may already have run up extra costs because she was sick as a calf.

The Bullvine Bottom Line
A dollar gained in revenue is an excellent thing assuming it builds profitability. However, remember, only a small portion reaches net earnings.  A dollar saved from cost, however, goes directly to the bottom line.  So move your focus away from the top-line and engage in a systematic approach for improving the bottom line. It’s the best way to ensure long-term dairy profitability and sustainability.



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Categories : Financial Managment

As the weather turns slightly warmer and our eyes zero in on the greening up of the season, it feels like a good time for spring cleaning.  Wouldn’t it be wonderful if you could profitably apply that urge to financial record keeping on the dairy farm? You don’t have to answer anyone but yourself but here’s another key question: “Did you file your tax return without the mess, stress or bother?”  Or are you still recovering from late night headaches, lost documentation syndrome and the guilt of missed deadlines?  If all was not smooth running in the financial records department, now might be the perfect time to tackle desk drawers, plastic bins and maybe even shopping bags that are overflowing with financial statements, receipts and correspondence. These are the signposts of your record-keeping shortfall! Forget about the annual shame and blame over “how did this happen?” and target a complete turnaround starting now!

1. Stop Crying Over Spilled Milk Records

Don’t blush! You are not alone. Despite the so-called digital age, paper records seem to have multiplied. You only have to watch one or two reality shows such as Clean Sweep, Pub Makeover, or Restaurant Disaster – to learn that unsuccessful businesses have one thing in common.  They do NOT keep good records.  There may be exceptions out there who manage well amid visual chaos, but it is hard to imagine.

It doesn’t surprise me that the owners and managers of struggling businesses are able to recognize, through increasing debt, declining morale and disappearing customers, that they are in trouble. What is surprising is that they keep on doing the same things they’ve always done -namely ignoring the paperwork -while continuing to hope for a different end result.

2. Plug The Hole In Your Milk Income Bucket!

We must get ourselves into the home or dairy office and commit to doing “forensic organizing” among the paper piles. We could be facing a mountain of receipts, stacks of bills-to-be-paid, overlooked notices and, as usual, a huge backlog of filing. Have you ever lost a registration certificate that you know you received, but you just can’t put your hand on? Do you find yourself facing multiple pages of feed bills and yet you’re not sure if this supplier is worth the expense? Have you paid more than you care to admit in late fees and premiums because you couldn’t face the mountain of paperwork? If so, there is a hole in your dairy income bucket.

Yes, too often struggling operations have dairy offices that fall somewhere between an archeological dig and a garbage dump. Nevertheless, that doesn’t mean the correct course of action is to give up and throw it all way. Records are crucial. Indeed, the size of the mountain is not an excuse for mismanagement. The most important feature of well-kept records is that they must be easily retrieved….for reference, legal backup and decision-making and maintenance. You must commit to plugging the leaks caused by mismanaged record keeping.

3. Lost Records Must Be Found

It all comes down to three ways of finding: finding the information, finding a way to store it and finding a way to use it. Ignoring the problem is not an option. So begin by gathering all the paperwork into one place. Having multiple disorganized locations (in the house/in the barn/in the truck) is merely providing an excuse to procrastinate and, even worse, it’s an opportunity for losing things! Once you have gathered all the paper into one location, take that massive pile and — one paper at a time – get it into the proper primary sort: cattle; crops; equipment; bills owing; bills paid. To do these sorts, you could use plastic envelopes or, if the piles are especially huge, plastic bags.  Apply a quick label and all like items can be gathered in one location. Your first quick sort will put everything into only three piles:  “To Do” To File” and “To Read”. When you start to see order forming out of the chaos, you will have taken the first step in recapturing lost money and missed opportunities. If you want to plug up that bucket hole, start by “restoring order”.

4. Records must be Used to Provide Value

There are many ways to keep records.  Some managers use methods that were in effect generations before them —- and are still successful.  Others are adapting to modern technology and revise and streamline their information flow to keep up with the digital age. Regardless of the specific method, the real test of your record management system is measured by one thingHow useful is it?  The best kept records that sit twelve months of the year in a drawer or file will still be there when the dairy operation fails! Data must be used for spotting trends, used for making decisions, used for revising inventory and used for negotiating terms. Dairy operations are dynamic, and decisions change based on the accuracy and use made of the records that are kept — and used!

5. Paying Bills in the Short Term Doesn’t Guarantee Long Term Stability

You may have decided at this point, that this article has nothing for you.  After all, even though your records are not perfect, you are keeping the bills paid. Finances 101 encourages us to believe that if the bills are paid, all will be well! However, in actual fact, there are other variables that must also be in order before we can ensure that all is well on the dairy farm. Short term solutions like using credit to pay bills or selling necessary equipment might allow the bottom line to remain in the black temporarily, but could prove ruinous in the long run. The three main financial statements – balance sheet, income statement, and cash flow plan — give the full picture and must be maintained and used in conjunction with each other to provide a clear picture all three of the farm’s business situation. Proper usage of these three information sources can only be done with consistently up-to-date and accurate record-keeping.

6. Keep Records Beyond the Simple Cash Flow Numbers

The top 1% of dairy managers separate themselves from average or poor managers by being meticulous about records that go beyond the simple bank balance or bottom line.  These managers are looking for any information that allows informed decision-making regarding economies of scale, herd size, farm structure, capital investment, feed costs per animal and genetics.  They are enthusiastic collectors of any statistic, research or anecdotal advice that could positively affect their particular operation.  These are the managers who seek out formulas such as DE (dairy efficiency) and seek out other industry leading benchmarks beyond milk production per cow.

7. What are Good Records Worth to You?

The challenge for all dairy managers is to figure out the best way to manage the massive amounts of incoming paper and information. At best, the financial disorder causes mistakes, late fees, overpaying, raised interest rates, and debt. At worst, chaos in your finances can destroy your credit simply due to inaction on paperwork stagnating on your desk. Not using information that impacts your cropping, breeding, and genetic decisions, can also impact sustainability and economic viability.

8. You Need to Keep Records Before You Can Break Them!

The more information you have at your fingertips, the more opportunity you have to turn a struggling dairy business around.  With clear benchmarks, goal setting, priorities, you no longer are managing from crisis to crisis.  Each step up in records organization is a step forward for the dairy operation. Not using information that impacts your cropping, breeding, and genetic decisions, can also impact sustainability and economic viability. Whether it is saving on expenses, decreasing vet costs, raising production, reducing overhead or making better use of labor and equipment …. The first step is the same… you must have good records. The three crucial usage steps are: 1. Discover what you need. 2. Prioritize according to your goals. 3. Take Action!

9. Help is Available.

Every manager has strengths and weaknesses. Sometimes it is the perfectionist who falls behind with the false idea that the perfect time will come to do the complete job. It isn’t lack of ability that is causing the problem. It’s inaction. There comes a time when it makes sense for your business to invest in professional bookkeeping, accounting, and back-office support to ensure your records are always kept up-to-date and accurate. Timeliness is the key. Moreover, delegating those tasks that would be better handled by someone else will not only increase your available time, but allow for a more efficient labor structure.

Ask yourself these questions:

  1. Do you have the time to do the work required? Will catching up on finances cause you to fall behind in another crucial area?
  2. Do you have much experience, knowledge or skills when it comes to making the financial decisions your operation is facing at this Expansion, selling or taking on partnerships or reducing liability may need legal advice.
  3. Can you afford to lose any more money by continuing your current mode of record management?
  4. If things go wrong, are you comfortable taking responsibility for your record keeping decisions?

The Bullvine Bottom Line

Regardless of whether you’re motivated by a new season and the potential for growth and renewal, or whether spring woke you up and you’re now hell-bent on clearing out the cobwebs that are holding your dairy business back, it’s clear that maintaining proper books and records is vital to dairy success! Spring cleaning may seem somewhat ordinary but, when applied to record-keeping, it will take your dairy to extra-ordinary!



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Categories : Financial Managment

Milk is a commodity.  While you can get different levels of fat and protein content etcetera, for the most part all milk is seen as the same.  As the world goes to more and more global trade, milk producers around the world need to realize that in a commoditized market, he who produces the lowest cost milk will win.  Currently the world average cost of production is $46USD/100 kg of milk.  So for those countries and producers that either don’t know their cost of production, or know it and see that it’s over $50USD/100 kg of milk, this is a direct wakeup call!

A recent IFCN report shows that low cost regions Argentina, Peru and Uruguay, Central and Eastern Africa  Central and Eastern Europe and some selected countries in Asia (except Japan and large farms from China) all had the lowest costs of milk production  in the world.  Also very noticeable in the report was how countries like Canada, Mexico, Norway, Sweden, Denmark, Portugal and France all had costs of production over $60US/100 kg milk.


While most major milk production countries in the world have seen their costs of production increase significantly over the past 12 years, the range of difference has come much closer together.  Some low cost production countries from 12 years ago are now almost at par with countries like the US.  New Zealand was actually the lowest cost producer back in 2000, with average cost of production at $12 USD/100 kg of milk, but with increases in input prices and an appreciating currency, costs increased to a level of $35 USD per 100 kg milk.  That is an increase of over 291% in just 10 years!  With such drastic changes in costs of production, it’s no wonder that New Zealand milk producers are having trouble competing on the world market.

As milk production becomes more globally than regionally focused, it’s countries like Chile, Peru and Saudi Arabia that are going to have the competitive edge.  It also means that countries like Canada, Sweden and France are going to find it harder and harder to compete.  Furthermore, it indicates that the world’s biggest dairy product exporters (on a milk equivalent basis) who are currently New Zealand, the European Union and the U.S. could start to see South American countries joining them on these top lists.

Actually the world’s cheapest milk is made in Cameroon, where it comes from beef cows and is a by-product of producing meat.  There the production costs work out to just $1.82 per hundredweight.  But it is not produced in such mass amounts that it can be considered a world player.

One of the scariest trends for all dairy producers is how the cost of production is increasing while the price of milk is not increasing at the same rate.  This trend is sure to cause many problems for producers around the world as we go forward.  Another scary trend for producers is the volatile price of feed, as was very evident in the summer of 2012 when milk prices fell and feed prices increased. Also when you factor in the increasing costs for transportation, environmental issues, food safety and labor, in the future where milk is produced could be quite different from where it has been produced up until now.

The Bullvine Bottom Line

World economic models will show you that, over time, those who can produce their products the cheapest will win.  This is also true for Milk.  As free trade agreements are breaking down the barrier to entry into many countries and the removal of government support programs, more and more producers are going to have to look at their operations and see if they can compete in a global marketplace.  If you cannot produce your milk for less than $46 – 50 USD/100 KG of milk, or you simply don’t know your cost of production, now is the time to either shape up or get out. The future does not look bright for those who can’t answer those two questions.  It is not too early to start planning for your future.


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What’s the plan?

Monday, August 19th, 2013

Are you just starting out?  Are you growing your breeding program and needing to get bank financing?  Maybe you’re transitioning to the next generation.  Whatever your situation a well-thought-out business plan is the vehicle you need to get you there.  Like any other viable business, your farm is more likely to succeed with a written business plan.

For many the thought of taking the time to write a business plan seems too daunting.  There are so many other things that need to be done.  But that is exactly the reason you need a business plan.  With so many things that can impact your dairy operation, you need to know how to steer through the issues.  The following are just a few reasons why your farm needs a business plan:

  • To avoid big mistakes: The last thing you want to do is work on something year after year , only to realize you were doomed from the start to fail.  That is exactly what can happen to many dairy operations.  Because they don’t take the time to plan everything out, they don’t account for all the potential mistakes they could be making.  Instead, they try to “change” the plan as they go along.  The problem was there never really was a plan to start with.  Developing and sharing a business plan can help ensure that you avoid the hurdles and sprint down the right path.
  • To counterbalance your emotions: If you are like many dairy breeders you are very passionate about your ideas.  The problem is this driving passion can make you susceptible to losing sight of reality.  It’s a lot to carry on your shoulders.  There are times that you may be overwhelmed by doubt, fear, or exhaustion.  When your emotions get the best of you, having a business plan lets you step back, and take an objective look at what you are doing and why, what you know for a fact and what you are trying to figure out.
  • To make sure everyone’s on the same page: Chances are, you are not building your farm by yourself.  Ideally, you’ll have family, children, maybe even parents involved.  A business plan helps get everyone involved and heading in the same direction.  There is nothing worse than find out part way down the road that someone on the team had a different plan than you did.  When I was in University, many classmates went back to the family farm.  Now some of them were very wise and established a plan before going back to the farm.  However, others didn’t and now find themselves lost and facing an uncertain future.
  • To develop a game plan: Dairy farming is a business.  Breeders forget that at their peril.  As with any sustainable business, execution is everything.  That means you have to set priorities, establish goals, and measure performance.  You also need to identify the key questions to answer, like “What will we specialize in?”  “Will we breed for profit or personal genetic gain?” and “What is the next generation transition strategy?”  These are all things you’ll address during the business planning process.
  • To raise capital.  If you raise or borrow money—even from friends and family—you’ll need to communicate your vision in a clear, compelling way.  A good business plan will help you do just that.  A good business plan will not only make it easier for you to get the financing you require to achieve your goals, but oftentimes it will help you achieve lower financing rates, or qualify for a  larger amount of financing.

More often than not, dairy producers have a basic business plan for their farm, but they certainly don’t have a plan for their genetic programs.  They may have some basic ideas about what type of cow they want, or what are their minimum requirements for sire selection, but they haven’t sat down and developed a clear genetic program.  This means setting measureable goals from start to finish.  What sires they are going to use.  How will genetics play a role in herd profitability?  What type of cattle will be needed in two years.  You see the breeding decisions you make today, typically won’t affect your profitability until two or three years from now.  This is especially true if you are planning on selling genetics (embryos, calves, bulls…).  You need to have a very clear plan.  These ventures require a significant financial investment, and no financial investment should be made without a clear understanding of exactly what the expected return is.

The Bullvine Bottom Line

Of course no plan is any good if you don’t follow it.  That doesn’t mean you cannot change the plan.  Actually, I think the plan should always be adjusting.  The marketplace is always changing.  A clear but flexible plan is exactly what you need to steer you through the good times and the bad times.  Plan on it!


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Why you should get rid of the bottom 10%

Wednesday, May 1st, 2013

Before there was Donald Trump, there was Jack Welch, one of America’s greatest business leaders in history. During Jack Welch’s 20-year career as chairman and CEO of General Electric, GE’s company value rose 4000%.  That is a 200% per year growth rate.  More than 50 times that of the average company.  How did Jack do it?  He got rid of the bottom 10% of GE’s employees every year.

Such bold and committed action could also apply in dairy farming. Although most of us are so entrenched in our own operations that we cannot always be objective. But we should be objective. Managers must make the tough decisions. Are you ready to Fire the Bottom 10%?  Management choices or decisions could very well be significantly dragging down your profits.

Random Poll

So The Bullvine polled dairy producers asking them:

“In managing your dairy enterprise, if someone said to you fire the Bottom 10% in order to increase your profits what would you do?”

The following four management areas were the ones the producers identified as their top “fire the bottom” moves.

Heifer Rearing

Producers tell us that the easiest and quickest change they can make is to stop raising all their heifer calves. In the past selling springing bred heifers or recently calved in first calvers was a revenue source. Some long for those days to return. The reality is that those days in North America are not about to reoccur with increased use of sexed semen and producers finding ways to retain still profitable older cows.

One producer in expansion mode dropped his heifer numbers back and used the barn space and feed to milk more cows. He did it using the heifer sized free stalls for a group of 22-26 month old milkers. Another producer changed his program to lower feed costs using a very high forage diet for all milking females thereby needing more cows to fill his daily milk shipments. His plan is that by dropping from 75 to 65 pounds of milk per cow per day he will have less cow turnover, a shorter calving interval and more profit per cow per day of productive life. Profit per cow per day (sometimes referred to as daily return over feed costs) is a term all producers are now using extensively.

Some producers report selling all heifer calves to a heifer raiser with the option of buying back needed replacements at $200 over going market price for any of his own heifers. He is very satisfied with them and he knows their ancestry. The only limiting factor being he must take care not to cause his farm any biosecurity problems with the reintroductions. He is considering testing his reintroduction for common diseases. But still sees that new cost much outweighing the cost for feed, labour or capital costs associated with raising his own replacements.

Reproductive Performance

Producers tell us that reproduction is their biggest thief of profits. Changing reproductive performance is not easy to put in place. Steps being taken include: not breeding back cows or heifers that have a history of poor reproductive performance; milkers requiring a fourth breeding are not rebred;  purchasing heat monitoring systems; creating a group of cows 60 days in milk until confirmed pregnant or a decision is made not to rebreed and using high genomic bulls instead of AI.

Other producers have worked with specialists and redesigned their transition cow program. Many report excellent results relative to calving, no retained placentas or metritis, quick entry into the milking string and high percent of first heats post calving by 50 days in milk. They have found a savings in staff time handling problems and maintaining detailed records.

Still other producers have handed off heat checking to their AI technician with very good results. It is one less job for the milkers and animal feeders to do.

Animal Health

Producers share about the frustration with the excessive time required by a sick cow, or a lame cow or a sick calf. ‘If only we did not have to be taking an extra twenty minutes per day to deal with each animal with a health problem, besides the drugs cost  and lost milk’.

One producer shared how he has built an expensive barn and manure handling system only to find that the number of cows with feet problems has exploded. His thinking is that producers are too willing to accept lameness, feet problems, foot trimming, footbaths, loss of milk, treatment costs and other detrimental issues as a cost of doing business. To that he added that in the end he had to spend even more money to re-design his housing system and now he has sand wearing out his equipment.  He actually longed for the good old days when cows could walk on dry natural surfaces.

Few of the producers see a way clear of health problems. This suggests that, as an industry, we need to think – if what we are doing isn’t working for us we definitely need to step back from the problem and find effective approaches to handling animal health.


Producers have given this topic much consideration and many have implemented changes. The list was quite long but it often does not hurt to repeat what producers are doing. The list includes: install robotics; milking the cows less than 120 days fresh 3x; hiring out the field work to a custom operator thereby eliminating labour and capital cost; capturing more cow information at every milking in both parlour and tie stall barns, (as mentioned above) heat detection systems; training and assigning specialty jobs to staff; purchasing software programs that capture and analyze data so manager can make quick accurate decisions and the list went on. In all cases it appears that dollar cost-benefit criteria were used to base decisions on. Definitely this is an area that producers feel more comfortable with. Which is reassuring given that the average herd size is growing and wage rates are increasing.

The Bullvine Bottom Line

Jack Welch earned a reputation for brutal candor in his meetings with executives. He rewarded those in the top 20% with bonuses and stock options. Sometimes as dairy breeders we are guilty of looking at our operations as a way of life and not as a business.   The hard truth is the dairy business decisions need to be based on dollars. Firing poor performers is not just good for your dairy business, it’s necessary. Where do you draw the firing line?






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