Five years ago, a 1500-cow dairy farm was on the verge of selling out, but not on their own terms.
The farm had not made money in three years. Their banker told them their loan was not going to be up for renewal, and the suggested action plan was the auction block.
And here, a good dairy farmer was having a hard time hanging on to hope that things would ever get better, not just for his farm, but for his life.
Fast forward to now, and that same dairy farm is still in business. In fact, they are still with that same lender and they have been making money. Even when $13 milk hit last summer, they were confident in their viability.
So what took them from the brink of bankruptcy to being profitable? Being able to not just pay their bills, but even in some cases, prepay their bills?
It was a phone call to Pauly Paul with Complete Management Consulting.
On the Uplevel Dairy Podcast, Pauly shares the three management areas he changed to increase income and reduce expenses quickly, and the four-part financial package that made all the difference.
Management Changes
The first three management areas that Pauly wanted to revamp to make the most impact were:
The Milking Parlor
Through Pauly’s evaluation, he wanted to find out how he could add more cows running through the parlor without adding labor costs. By making some tweaks and changes to the workflow, he was able to add another rotation of cows through the parlor and help the workers become more efficient with their time.
Feed
When times are tough, sometimes you don’t always need the best of the best. In the feed department of management, Pauly worked with the nutritionist to reduce feed costs and increase the amount of forage being fed. This helped lower costs and provide a bit more cushion on expenses.
The Breeding and Replacement Heifer Program
One of the most impactful areas Pauly was able to help cut costs was the breeding program. For this dairy, it made the most sense to breed everything to beef and eliminate replacement heifer expenses. The dairy could then buy replacements back before freshening with the income from black calf sales.
The 4-Part Financial Package
The second part of Pauly’s process was doing a deep dive into the dairy’s finances. Let’s cover the 4-part financial package briefly below.
The first thing that Pauly wanted to review with the overall cash flow statement. This allowed him to get a bird’s eye view of the dairy’s finances to see where money was coming and going. From there, he was able to plug holes where they were losing money and see where there was room to increase cash flow as well.
Along with this first review of the finances, Pauly went through the dairy’s current budget with a fine-tooth comb. Once again, the goal here is to find out where to adjust the budget to increase overall revenue and cut expenses where possible.
This led Pauly to the third step in the financial process, where he created several different budget scenarios, all with projected changes. For example, he ran budgets with his proposed changes and where the dairy would be if they followed his recommendations, then he also created a budget to show where the dairy would be if they didn’t make any changes. This allowed the owner to really see the possibilities of what a few key changes could do for the future of his dairy.
The final part of this financial process was the progress report. Because of Pauly’s plan that he put in place, he was able to go back to the lender with a report showing where the dairy was going to make changes that would improve overall cash flow. This then put trust back on the table for the lender to approve the note for the dairy.
Today, five years later, the dairy that was on the verge of a forced sale is in good financial position, and the dairy farmer and his lender are both looking forward to a positive future.
Listen to the full episode of the Uplevel Dairy Podcast here: https://podcasters.spotify.com/pod/show/upleveldairy/episodes/Saving-a-1-500-Cow-Dairy-Farm-from-Foreclosure-with-Pauly-Paul--Complete-Management-Consulting-e2a885s
