Bringing Bankrupt Dairy Farms Back in the Black
Imagine this: Being escorted to a dairy by the police, only to find full pits, empty feed pads, disgruntled employees … and to top it off, a tuberculosis quarantine.
Most people would run the other way. But as a dairy consultant who has handled my share of receiverships, I believe that even in the worst situations, there is always a way to turn things around.
When I arrived at the dairy and assessed the situation, three main objectives were clear:
- Increase cash flow
- Reduce expenses
- Rebuild relationships
The cash flow lever our team pulled first was in the milking parlor. The parlor was not running around the clock, so we minimized downtime by running a few pens through the parlor once more. This fourth milking kept the parlor humming and kicked up the milk produced, thus adding extra dollars to the milk check.
As we looked for ways to reduce expenses, an easy one was to make the dairy’s sand separation lane functional again. That allowed us to save money on purchasing additional bedding while also making the cows more comfortable and encouraging milk production.
Streamlining the milking process and cow flow made it easier for employees to do their jobs and resulted in greater labor efficiencies, which helped to simultaneously increase income and reduce expenses.
Feed and feeding was another key area where we made swift adjustments. Starting with the ration, we took out unnecessary ingredients to reduce costs without lowering milk production. We also discovered the dairy’s feeder was not consistently following the ration or delivering feed in a timely manner. Replacing this position with a different employee was an overnight difference as well.
During this challenging time, we understood the importance of clear communication and building trust. That meant engaging in conversations with employees, vendors, neighbors, and other stakeholders to reassure them of our commitment to turning the dairy around. Being boots-on-the-ground with the day-to-day operations, helped to show dedication and gain the respect and trust of the employees. We also needed to open up communication with the milk plant and the feed mill.
So what ever happened to that dairy that everyone else would have given up on? In one year’s time, we had it turned around, making money and positioned as a profitable, turn-key investment for an excited new buyer.
As we approach the year 2024, the dairy industry continues to face major challenges, however, I believe that dairies can minimize losses and achieve profitability by looking for ways to increase cash flow and operational efficiency, reduce their expenses and practice effective and open communication with their key stakeholders including the banker, veterinarian and nutritionist.
For more on business, read:
- How Long Will the Sizzling Hot Market for Dairy Replacements Continue?
- Dairy Producers Face Tightest Margins on Record
- World Milk Production Begins New Year Weak
- From a Recession in China to $4 Corn, Here Are 10 Potential Surprises Ag Economists Say Could Impact Agriculture in 2024
- What is the Impact on Dairy Sales When Consumers are Feeling the Pinch?
Pauly Paul and his team at Complete Management Consulting have proven time and again that struggling dairies can be transformed into profitable and viable businesses. By focusing on areas such as cash flow management, labor optimization, and process improvement, they have brought hope and financial stability to many dairies. With their expertise and dedication, they empower dairy farmers to navigate the challenges of the industry and thrive in the face of adversity.
