CLYDE, N.Y. — David M. Kohl was told by his high school guidance counselor that he “‘was not college material,’” he recalled.
Today he has a Ph.D., is a professor emeritus, Agricultural and Applied Economics, and a member of the Academic Hall of Fame, College of Agriculture & Life Sciences at Virginia Tech.
Now a public speaker and educator traveling 30 to 40 weeks annually, as well as the owner of a creamery, much has changed for Kohl since he was a teen just starting out. Much has also changed in agriculture, which was the theme of his recent presentation at an open house hosted by A.N. Martin Systems, LLC.
Kohl’s creamery uses glass bottles as a distinction to compete against retailers, such as Walmart, that easily undersell his products. His operation also produces flavored milk, eggnog and ice cream. Value-added dairy goods represent a sector in which dairymen can hope to break even and perhaps turn a profit.
The emphasis on niches and value-added goods represents one of the big changes in the industry that is helping them stay in business during this fourth year of “economic reset” for the dairy industry, as Kohl called it.
“This recession, starting in 2013, is taking out those who are poor and average business managers,” Kohl said. “You need a high business IQ. You’ve got to focus on the fundamentals and crowd out the noise.”
He named his “Four Cornerstones of Management” for business and lifestyle success as: planning, execution, strategizing and monitoring.
“Put your systems together,” Kohl said. “Every business in this room has a different system. Everyone says, ‘You have to have ‘x’ number of acres or cows’ but every operation is different. Spend 5 to 7 percent of your time planning.”
He added that many operators, ironically, spend much time fretting over $100 expenditures and much more flippantly make $100,000 decisions. He thinks that the biggest frustration among lenders, crop consultants and others helping farmers is that many operators fail to execute their plans. Plans should be flexible, however.
“If you develop a plan earlier in the year, that plan will change,” Kohl said.
Many of the more experienced farmers he knows have lots of experience raising animals and crops and possess equity, but don’t have the high business IQ needed to meet the challenges of today’s business environment.
“Eighty percent of a business plan is cash flow,” Kohl said. “Monitoring is where you bring in experts and advisors one time a month or at least quarterly.”
Despite his experience and education, Kohl does this on his operation to bring a fresh perspective. Just hiring a professional to handle the taxes is what he calls “drive-by accounting.”
One of the big changes in agriculture is that farmers will have to work more with lenders, both to help meet day-to-day expenses during lean times of the year or of the business cycle, but also to make changes to their business such as increase efficiency or generate a new revenue stream.
Kohl thinks that good times can lull operators into thinking that that’s the “new normal.” Instead, he said “that’s the time to cover your behind.”