The Economy and Your Business – Gary Sipiorski, Vita Plus

The picture of the dairy industry is changing fast with new technology, consolidation and volatile global markets.  Gary Sipiorski, Vita Plus dairy development manager, said this will have big impacts for custom harvesters too.

For starters, it means the financial clock is ticking, Sipiorski said during his presentation at the Vita Plus Custom Harvester Meeting.  He challenged attendees to develop an action plan to beat the clock.

Click here to download Sipiorski’s PowerPoint Presentation.

The picture of the dairy industry is changing fast with new technology, consolidation and volatile global markets.  Gary Sipiorski, Vita Plus dairy development manager, said this will have big impacts for custom harvesters too.

For starters, it means the financial clock is ticking, Sipiorski said during his presentation at the Vita Plus Custom Harvester Meeting.  He challenged attendees to develop an action plan to beat the clock.

“You need to make money, you can’t just drive,” Sipiorski exclaimed.

He reminded attendees that profit isn’t a dirty word.  If you just drive all day and don’t get paid, you’ll find yourself in a difficult financial position with your lender when you need a loan for new equipment.

To avoid that situation, Sipiorski said it helps to know the important financial numbers before you go for a loan.  Knowing your numbers can drastically improve your chances of receiving a loan and give you an idea of where your money is going.

The items and numbers you should have and know before going to the bank are:

• A current balance sheet of assets and liabilities (subtracting liabilities from your assets will give you your net worth)
• Your cash flow from the previous year
• A financial projection for the upcoming year
• Your cost of operation
• Key ratios, such as:
  • Equity (the difference between the value of your assets and the value of your liabilities)
  • Debt coverage (how much of your debt makes up your net income) – should be less than 20 percent
  • Return on assets (how profitable a company is compared to its assets) – should be about 15 percent or higher
  • Return on equity (net income as a percent of your equity) – should be at or above 20 percent

Communicate these numbers with your lender; he or she needs to know it all to help you make the best financial decisions.

2016 was a rough year for many dairy producers, but financial projections have milk prices hovering near $17 per hundredweight (cwt) this coming year.

“Money is being made out there, so that means you’ve got to get paid,” Sipiorski said.

He reminded everyone that it is OK to be nice, but you need to get paid for your work.  As his discussion came to a close, Sipiorski motioned toward an empty chair and said that was a custom harvester that couldn’t make it to the meeting.

He motioned to several other empty seats and said the same thing.  Those were custom harvesters that didn’t take this seriously, didn’t know their numbers and had to sell out.  He said you have to do this stuff to be sitting in that chair.

“What’s your action plan?” Sipiorski asked again.  “I don’t want to see anymore empty chairs; I want you to be a part of this business.”