By Sandy Buxton, CCE CAAHP
Ok – that is my title and subheading. Jason Karszes, of PRO-Dairy, presented this info recently but it had a better title: “Profit! Management Decisions During High Cycles?”
No matter how you label it – the message is still the same. A business needs to be taking action at all times to help it survive and thrive, especially if it rides a rollercoaster of price swings.
Photo Credit: Melanie Holtsman via Compfight
During high cycles, the strategic decisions should help to improve efficiencies in main production areas, build financial reserves and prepare for long term investments. During the low cycles, the business needs to operate as leanly as possible, taking needed money from reserves or low interest borrowing and taking advantage of any opportunities that may come along.
Remember – a key question to ask – just because you can cashflow or pay for a change, is it a good business decision? Likewise, if an investment is a “good deal”, is it a good business decision?
Making business decisions solely for tax liability issues or because it can be paid for is usually a mistake for the long term success of the business. Owners need to position their business for the future.
- What can I do today to impact the future?
- What opportunities may come available?
- What threats need to be addressed?
- What things need to be done to improve the flexibility of the business to jump on opportunities?
- What can be done to continue to grow profits?
- What can be done to position business for the next low cycle?
Most people don’t understand the goal in the production of profit is to have something that can be used to:
- Maintain the business;
- build the business;
- start another business;
- fund retirement;
- provide for investment outside the business;
- spend it;
- pay taxes; or
- position the business for the future.
Knowing where the business is going – what the 5 to 10 year vision or goal looks like helps to direct this conversation. But creating a list of critical needs for the business and directions to take to achieve the view may be improved through the use of an advisory team which can provide a wider view of strengths/weaknesses and opportunities that exist in the area.
The ultimate goal of the business and your decision making process should be to reduce the rollercoaster ride of price swings to more of a float with gentle ocean swells, some movement but nothing very uncomfortable.
If you would like more info or to see Jason’s presentation, please feel free to contact Sandy at sab22@cornell.edu or 518-380-1498.
