Everyone wants to know which of the thousands of management factors most influence the ultimate financial success of a dairy business. If a dairy producer were to ask 100 different nutritionists, bankers and accountants this question, he or she would undoubtedly see 100 completely different lists. Here are six issues that are the "cream of the crop" in terms of long-term success on dairy operations:
Develop a plan. Have you ever taken a family vacation without first talking about what you want to do and see? Do you then plan how and where you will travel? A carefully developed plan helps a business determine its long-term destination and how it will ultimately achieve its desired results. Remember the old saying, "Failing to plan is planning to fail."
Take care of the cows. No matter how you slice it, cows pay the bills. Therefore, if you manage reproduction, herd turnover, herd health and feed quality in top-quartile performance levels, the milk will come.
Empower your management team. Even a 35-cow dairy requires input from more than one person. A team is not a collection of individuals working independently under constant direction from the coach. It is instead made up of individuals who have been recruited into positions well-suited for their talents, properly trained and empowered to manage (not just complete tasks). Remember that your team also includes "external" staff such as the veterinarian, nutritionist, accountant and many others. Goals and expectations for these professionals need to be set as well.
Focus on capital efficiency. As consolidation continues to impact our industry (just as it has been doing for more than 60 years), careful investment in cash-producing assets is becoming an increasingly influential dynamic. Margins will narrow as more and more players exit so it will be more important than ever to make sure business assets produce as much cash as possible.
Use information systems. Don't count on improving production efficiency if you don't have a method of measuring production costs, productivity gaps and improvement over time.
Live by a marketing plan. We all talk about volatility in milk prices, and the industry is just now seeing the tip of the iceberg. Consolidation will bring even greater price volatility and managing market risk will take on greater importance. More and more producers will realize financial rewards from managing "form" (not just selling raw milk to a marketing agency) much differently than what is common today.
Always consult with your veterinarian or other management expert for specific recommendations for your operation.
Source: Dairy Calf & Heifer Association
This Tip of the Week was sent in by Greg Squires, dairy operations consultant in Ashland, Ohio.