Staying Competitive in a Tumultuous Market
Sep 17, 2012
A banker’s checklist for success.
By Greg Steele, AgStar Financial Services, Dairy Lending Specialist
Competitive pressures are only going to continue in today’s dairy businesses, and if you’re not improving, you’ll fall behind the competition. Rapid rises in feed costs, market volatility and increasing land costs are just a few of the factors contributing to the turmoil, making it progressively more difficult for even the keenest manger to develop a 2013 budget that leads to profitability.
A proven approach that can lead to business success is to hire a qualified business consultant to serve as an expert resource for you and your business. Some would contend that working with a business consultant is essential — a key strategy to remain competitive in the dairy business. Seeking the assistance of a qualified, experienced business consultant with whom you can talk openly and receive candid feedback, can make the difference between black and red. Business consultants can help analyze, provide insight and offer guidance for many aspects of an operation.
Below is a checklist to get you started:
Accounting and Production Systems:
Is the information generated adequate?
Do systems improve and support management decisions?
Does it provide the information necessary for tax reporting compliance?
Do processes and procedures support capturing/measuring reliable and accurate information?
- Are budget assumptions relevant?
- Will cash flow be adequate?
- How will necessary capital purchases and improvements be funded?
- How is financial performance measured?
- What key performance indicators are recorded, measured and discussed on a routine basis to track financial progress?
- How are the financial and production systems linked to provide economic analysis of performance?
- What kind of benchmarking can be used to compare your operation to others in a fashion that can identify opportunities for improvement?
- Where are the bottlenecks that are limiting profits?
- What can be done to improve the cost structure?
- Are capital, management and resources being managed effectively?
- What improvements in the operational systems are needed?
Margin management programs:
- What elements are needed to have a sound marketing plan?
- Is the cost of production predictable?
- What tools are available to implement a marketing program?
- Which strategies and targets will be most successful to your business?
- How often do you evaluate and adjust the plan?
- Where are the opportunities to improve labor efficiency?
- Are parlor procedures sound?
- Is the work force organized?
- Would increasing job specialization improve performance?
- What additional employee training is needed?
- Are OSHA and other labor regulations in compliance?
- Is the business structured for long-term success?
- Are various tax management options available?
- Are the “buy/sell” agreements adequate?
- Will the business structure accommodate growth?
- How will growth be funded?
- Are the plans in place to protect the business from excessive risk?
- Are interest rates fixed?
- Are input supplies booked?
- Is milk priced?
- What are the contingency plans for a crop failure, a disease outbreak or the unexpected?
- What is the environmental risk to the business and are you prepared for unforeseen events such as manure spills or accidents?
- What is the vision for the business and personnel?
- What are the opportunities for the next generation?
- How can it be implemented?
- What is the timeline for the transfer?
Too often people are intimidated by the fees associated with management or financial consultants. Don’t be. Simply put, business consulting is an investment into the future performance of your business. Fees are generally structured on an hourly basis however; some consultants do provide service on a project basis, depending on the nature of the work. Keep in mind that a good decision that improves business revenue or reduces cost will more than pay for the cost of consulting many times over.
The services of a qualified business consultant can be just the tool to help your business compete for the long run. I believe this old adage fits well here: “If you are not trying to constantly improve your business, you are falling behind the competition.”
Greg Steele is vice president of agribusiness capital with AgStar Financial Services, ACA. His focus is working with commercial dairy operations that have grown and expanded their business. He provides expertise in the area of finance, business planning, and accounting. Contact Steele at (612) 963-7941 or firstname.lastname@example.org. For more insights on markets, risk management and other topics that impact your operation, visit AgStarEdge.com.