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Fiscal Fitness

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Financial management experts, lenders and accountants share ways for dairy producers to improve money and credit management. Look for help on budgets, taxes, loans, financial performance and even bankruptcy.

Dairy Nightmares

Mar 10, 2013

Dairies can learn a few business turnaround lessons from Chef Ramsey and his "Kitchen Nightmares" TV show.

By Dave Sousa, CPA

I have enjoyed watching the "Kitchen Nightmares" television episodes with Chef Gordon Ramsey walking into an established restaurant and finding a real mess.

It is always amazing to watch the restaurant owners who are in a financial bind still wanting to do things exactly as they have always done them. The entertainment value is fun with Chef Ramsey yelling profanely at the owners until they finally agree to try it Ramsey’s way. On the outside looking in, it is easy for me to see where the problems are and what needs to be done to fix their financial mess. The business owners seem to be blinded by what they cannot see that is so obvious to everyone else.

The day-to-day mundane tasks seem to take on a life of their own. We hear things like, "That is the way we have always done it," or "I don’t know why we do it this way, we just do." Often the real problem is with the owners themselves who are not accustomed to having someone else tell them how to run their business more profitably and pointing out the real problems. The owners seem content to keep doing the same thing over and over and they keep getting the same unsuccessful results.

After watching the Kitchen Nightmares show now for several years, I have come to the conclusion that restaurant owners and dairy owners are similar. I know several restaurants with amazing great food that could not survive financially in the restaurant business. I’m sure that we can all remember our favorite restaurant that went out of business. We always wonder how such a wonderful restaurant couldn’t survive while others that do not seem to appeal as much to us continue on with success. I can relate the problems in the kitchen of a restaurant directly to the problems experienced by dairy farmers. Maybe these two businesses are not all that dissimilar.

Comparing the two business models, we can focus upon three things that are similar between a restaurant and a dairy farm.

The first is the employees. Are they doing the best job possible every day? If we think of the restaurant cook as our dairy feeder, we know that they have the training and talent to do the job, but are they consistently doing everything correctly every day? I have seen feeders who go unmonitored and develop their own recipe for feeding the cows on their own schedule and feeding time. I can see Chef Ramsey yelling profusely at a feeder telling him just how do a better job feeding the herd.

The second is really the overall cleanliness of the restaurant or dairy farm. A clean and organized operation will usually be more profitable than a disorganized dirty mess. Think about feed spoilage, mastitis, etc.

The last one is the hardest to correct: the owner’s lack of commitment to positive changes in the business. If you think that you do everything perfectly, you are most certainly not going to survive in the restaurant or dairy business. To be a successful, profitable business, you must embrace change and be always looking for a better and more profitable way of doing things.

Sometimes we need a fresh set of eyes focused upon our operation. You really cannot see your own daily operational deficiencies. It can be a friend or a professional who can take a second look at the way you run your business and help you to make changes to increase the profitability of your operations.

With so much financial distress that the dairy industry has incurred over the last several years, you too might have slipped a little too far into disaster mode. Now it is time to look at recovering and running at maximum profitability. Gordon Ramsey would be proud of the changes that you have made.

David Sousa, a CPA, is the owner of Sousa and Company, an accounting firm based in Visalia, Calif. His firm works with more than 80 dairies in multiple states, preparing financial statements and income tax returns. Sousa also consults with dairies on cash-flow forecasting, financing, estate planning and bankruptcy. Contact him at dave@sousa-and-company.com or (559) 733-0544, est. 108.

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