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Busines $ ense. Management Training for Dairy CFO’s. Bradley J.Hilty Information Management Specialist Penn State Dairy Alliance. Busines $ ense What is Busines$ense?. Best Management Practices in BM & IM Standardization of IM Practices - PowerPoint PPT Presentation

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  • Busines$enseManagement Training for Dairy CFOsBradley J.Hilty Information Management Specialist Penn State Dairy Alliance

  • Busines$enseWhat is Busines$ense?Best Management Practices in BM & IMStandardization of IM PracticesA systematic approach to business analysisIdentifying bottlenecks with benchmarksA Dairy Alliance program to train Chief Financial Officers of dairy businesses in:

  • Busines$enseProgram ObjectivesEnhance participants understanding of BMP in IM & BMImplement standards for data managementProvide benchmarks for evaluating businessProvide a systematic approach to evaluate businessProvide tools for ongoing business evaluationImprove information for decision making

  • Busines$enseHow did we do this?Established a BaselineCollect data for Dairy Farm Business AnalysisImplement standards for IMShort termLong termEvaluate Cost of Production-DairyCOP$Evaluated Business Performance-DFBSDevelop Strategies to Address Weaknesses

  • Busines$enseHow did we do this?Hands On ExperienceData Collection for DFBSSystems analysis using benchmarksCalculating Production Costs with DairyCOP$Group DiscussionThe Key to Busines$ense (10-15 dairies)

  • Busines$enseFeatures of Busines$enseLecture TopicsCharacteristics of successful businessesStandardization of IM practicesBenchmarks for measuring business performanceManaging investments for profitabilityCost control & net margin analysisAnalyzing incremental costs and returns

  • Data CollectionObservation, measuring & recording of data

    Data OrganizationProvides structure to the data set Data ProcessingData entry & calculationsData ReportingPresents data for interpretationData Integration1Data Utilization2The Six Steps of Information ManagementBradley J. Hilty, Information Management Specialist, Penn State Dairy Alliance

  • Busines$enseIf you dont measure it, you cant control it.GIGOProvide Accurate Feedback to OthersBenchmarks Comparisons Standardizing the ProcessImportance of Sound IM Practices

  • Busines$enseMaximize profitsMaintain adequate cash flowBuild equityQuality of LifeFamily EmployeesOthers??Goals of Successful Business Owners

  • Busines$enseGoals of Successful Business Owners: Achieve BalanceMaximize profitsMaintain adequate cash flowBuild equity

    Quality of Life

  • Busines$enseGoals of Successful Business Owners: Achieve BalanceMaximize profitsMaintain adequate cash flowBuild equity

    Quality of Life

  • Busines$enseGoals of Successful Business Owners: Achieve BalanceMaximize profitsMaintain adequate cash flowBuild equity

    Quality of Life

  • Busines$enseVery ProfitableGenerate Abundant Cash FlowSound Financial BaseEfficient in the Use of InputsCapital EfficientCharacteristics of the Successful Businesses

  • BUSINESS ANALYSIS- Five Star Financial BenchmarksProfitabilityReturn on Assets(ROA) >10%LiquidityTerm Debt & Lease Coverage Ratio (TDLCR) > 1.20Solvency% Equity% Equity > 60%Financial EfficiencyOperating Expense Ratio

    OER< 75%-CorpOER.6 Dairy & CropsATR> 1.0 Dairy

    $Bradley J. Hilty Information Management Specialist Penn State Dairy Alliance Program

  • Evaluating Herd Performance with BenchmarksProductionMilk/Cow/DayHerd StatusDIMCow ManagementCull RateReproductionPregnancy RateUdder HealthSCCDiagnostic BenchmarksDiagnostic BenchmarksDiagnostic BenchmarksBradley J. Hilty Information Management Specialist Penn State Dairy Alliance Program

  • Benchmarks Evaluating Business PerformanceBusines$ense

    CriteriaRatioAverageLeadersGoalProfitableROA4-4.5%15-20%8-10%Cash FlowTDLCR1.152.001.25Financial Base% Equity50-55%50-55%50-60%Financial EfficientOER72-76%< 65%65%Capital EfficientATR.40-.45>.65.65 (>1.00)

  • Key Performance IndicatorsKey Herd Performance BenchmarksMilk/Cow/Day Production (>70 lbs)Cull Rate Total Cow Management (
  • Cost of Production System Busines$enseHands-On:

  • Analyzing Business Performance Busines$ense Hands-On:

  • Busines$enseUnderstanding Bottlenecks?PRODUCTSProduction Systems Are PipelinesINPUTSBradley J. Hilty Information Management Specialist Penn State Dairy Alliance Program

  • Busines$enseUnderstanding Bottlenecks?INPUTSPRODUCTSA restriction in the product pipelineIt is important to detect & correct the most restrictive bottleneck first.Fixing the wrong bottleneck is of no benefit.Bradley J. Hilty Information Management Specialist Penn State Dairy Alliance Program

  • Evaluate investment strategies;Consider liquidation or reallocation of assetsIs the business profitable?ROAIs the business financially efficient?OERIs the business capital efficient?ATRIs the production a problem?Milk/Cow/DayExamine Investment per cowLand ValuesWhy is production a problem? Examine production record KPIsEvaluateForage Quality;Cow Comfort;Ventilation;Water; Management SOPsExamine Key ExpensesFeedLaborOthers Busines$enseA systematic approach to analyzing business performance. Bradley J. Hilty Information Management Specialist; Penn State Dairy Alliance

  • Busines$ense Business Analysis Results:

  • Busines$ense

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    ROA Range

    Distribution of ROA

    COP$

    Farm36-136-28-18-257-18-38-48-57-1Cntr-143-225-220-125-120-243-1MD-0121-1C-1P1P2A157-2

    Year20012001200120012001200120012001200120012001200120012001200120012001200120012001200120012002

    Milkings/Day33232333332222222332332

    LocationLancasterLancasterBradfordBradfordSullivanBradfordBradfordBradfordBlairCentreMercerErieCrawfordErieCrawfordMercerMDCapitalCapitalCapitalCapitalCapitalSullivan

    Herd Size2442087541017520031040447766010167.34989112316154590245407267429110

    Milk Sold/Cow26,20823,75021,84025,75514,02424,69520,95720,99625,05123,09414,55419,27523,01018,22521,00015,12619,04122,25718,14520,71923,09522,52426,37111,818

    Replacements2401786535090170210320298450905230556030080529220320215272AvgSDMinMax85

    Cull Rate27.0%35.0%29.0%30.0%32.0%30.0%35.0%21.0%24.0%26.0%30.0%33.0%30.0%32.0%32.0%23.0%56.0%34.0%37.0%32.0%34.0%32.0%34%31.5%6.8%21.0%56.0%5.0%

    Acres4755503007504005165951,3003001,570192157165340273766200750420450600700270

    % Owned58.9%30.9%33.3%062.5%71.7%66.4%10.8%56.7%14.3%100.0%88.5%100.0%26.5%73.3%55.6%0.0%92.0%100.0%31.1%33.3%32.1%55.6%

    Facilities1.001.001.0021.001.001.001.001.001.001.001.001.001.001.001.002.001.001.001.001.001.001.00

    % Forage Raised100.0%100.0%100.0%75.0%80.0%100.0%75.0%100.0%70.0%100.0%95.0%100.0%100.0%100.0%100.0%100.0%100.0%80.0%100.0%100.0%98.0%92.0%95.0%

    % Grain Raised65.0%90.0%30.0%0.0%0.0%5.0%0.0%0.0%0.0%20.0%0.0%5.0%100.0%70.0%65.0%95.0%65.0%0.0%50.0%0.0%0.0%0.0%0.0%

    Grazier00000001001000000000001

    Acres/Cow1.952.644.01.82.3323122234221121222

    Milk Price$15.67$15.08$15.68$15.30$18.36$16.67$15.42$15.88$15.84$16.94$18.40$15.77$15.42$14.99$14.28$18.00$13.38$17.59$15.87$15.91$16.27$16.53$17.53

    Milk Income/Cwt$15.67$15.08$15.68$15.30$18.36$16.67$15.42$15.88$15.84$16.94$18.40$15.77$15.42$14.99$14.28$18.00$13.38$17.59$15.87$15.91$16.27$16.53$17.53

    Milk Income/Cwt (Net)$14.85$14.46$15.16$15.30$16.87$15.34$15.23$15.26$14.91$15.73$17.72$14.97$16.19$14.22$13.58$18.00$12.52$16.42$15.19$15.08$15.54$15.42$17.11

    Total Income/Cwt$16.93$17.26$17.96$16.20$21.06$17.89$16.23$17.54$16.62$19.68$20.68$16.79$18.20$15.85$15.06$19.34$14.67$18.52$18.09$16.82$17.23$16.92Capital AvgAvgSDMinMax$17.63

    Basic Production Expenses$6.40$5.11$7.46$7.43$7.60$6.94$7.71$8.29$6.45$5.77$7.88$4.69$5.71$3.68$9.80$6.13$7.20$5.66$7.84$6.96$6.58$7.77$0.00$6.96$6.78$2.18$1.91$10.66$7.54

    Feed$4.50$3.17$5.24$5.27$6.42$4.50$5.79$6.32$4.43$3.72$5.46$3.22$3.79$1.10$6.27$4.47$5.55$4.01$5.13$4.56$4.72$5.07$4.70$4.67$1.22$1.10$6.42$5.48

    B&R$0.25$0.23$0.25$0.20$0.02$0.29$0.41$0.30$0.23$0.07$0.40$0.17$0.13$0.17$0.24$0.38$0.14$0.16$0.17$0.29$0.11$0.18$0.18$0.22$0.10$0.02$0.41$0.23

    Vet$0.57$0.45$0.40$0.46$0.24$0.67$0.38$0.29$0.47$0.72$0.39$0.39$0.34$0.26$0.50$0.53$0.36$0.42$0.49$0.74$0.35$0.73$0.54$0.46$0.15$0.24$0.74$0.13

    Livestock Exp$0.39$0.67$0.27$0.71$0.25$0.73$0.45$0.74$0.75$0.79$0.73$0.22$0.31$0.96$1.28$0.14$0.14$0.34$0.61$0.88$0.49$1.21$0.71$0.59$0.32$0.14$1.28$0.15

    Supplies$0.30$0.24$0.66$0.31$0.28$0.30$0.33$0.43$0.20$0.22$0.38$0.29$0.62$0.81$0.96$0.34$0.53$0.47$1.18$0.27$0.67$0.30$0.58$0.46$0.26$0.20$1.18$1.08

    Utilities$0.39$0.35$0.63$0.49$0.39$0.44$0.36$0.21$0.37$0.25$0.52$0.40$0.52$0.38$0.55$0.27$0.49$0.26$0.26$0.22$0.24$0.28$0.25$0.38$0.12$0.21$0.63$0.48

    Labor$3.34$3.77$3.34$1.80$2.31$2.94$2.42$2.67$3.15$4.69$3.24$2.40$0.71$1.78$1.27$4.91$3.92$3.35$5.17$2.98$3.79$2.87$0.00$3.63$3.04$1.12$0.71$5.17$1.46

    Wages$1.31$1.53$1.25$1.54$2.31$2.01$1.52$2.11$2.62$3.83$1.54$0.00$0.71$1.50$0.98$1.71$1.02$2.15$2.61$1.72$2.61$2.14$2.25$1.76$0.80$0.00$3.83$0.38

    EB$0.10$0.11$0.07$0.26$0.00$0.29$0.31$0.42$0.00$0.65$0.40$0.00$0.00$0.00$0.29$0.90$0.51$0.46$0.10$0.99$0.00$0.24$0.36$0.28$0.29$0.00$0.99$0.00

    FLOD$1.93$2.13$2.02$0.00$0.00$0.64$0.59$0.14$0.53$0.21$1.31$2.40$0.00$0.28$0.00$2.30$2.39$0.73$2.46$0.27$1.18$0.49$1.03$1.00$0.93$0.00$2.46$1.08

    Machine Exp$0.83$2.15$1.21$1.29$2.17$1.59$1.63$1.61$0.71$1.90$1.68$0.71$0.87$1.01$1.93$1.19$1.68$1.14$1.12$1.39$1.51$1.08$1.25$1.38$0.44$0.71$2.17$1.22

    Facilities Exp$0.82$0.62$0.55$0.32$0.65$0.34$0.00$0.05$0.24$0.29$0.78$1.22$0.39$0.03$0.00$1.67$0.93$0.62$0.11$0.14$0.75$0.03$0.33$0.48$0.43$0.00$1.67$0.08

    M&D$0.82$0.62$0.52$0.00$1.48$1.32$0.19$0.62$0.93$1.21$0.68$0.80$0.77$0.77$0.70$0.00$0.87$1.16$0.68$0.83$0.73$1.11$0.90$0.77$0.38$0.00$1