Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Economic Benchmarks for Dairies: Eight Rules You Cannot Break

1,732 views

Published on

Gary Sipiorski presented this information for DAIReXNET on October 7, 2013. The full version is available at http://www.extension.org/pages/15830/archived-dairy-cattle-webinars.

Published in: Education, Business, Technology
  • Be the first to comment

  • Be the first to like this

Economic Benchmarks for Dairies: Eight Rules You Cannot Break

  1. 1. An Employee-Owned Company Economic Benchmarks for Dairies: Eight Rules You Cannot Break
  2. 2. An Employee-Owned Company Gary Sipiorski
  3. 3. An Employee-Owned Company “You Can’t Break the Rules” • 2:1 Liquidity • 20% of Milk check to pay P&I • 85% Expense Rate • $3K-$5K Debt/Cow • +30% Equity • 3 Year Asset Turnover Rate • 8% ROA (Profit) • Know Your COP
  4. 4. An Employee-Owned Company Liquidity Current Assets • Cash • Savings • Receivables ($ owed you) • Feed • Market Steers/Hogs • $2.00 Current Liabilities • Payables over 30 days • Past due rents • Past due RE taxes • Principal due in next 12 months • $1.00
  5. 5. An Employee-Owned Company Other Considerations • Payables at 18% Interest • Think About Fixing Interest Rates
  6. 6. An Employee-Owned Company No More Than 20% of the Income for I&P Payments • 15% is better • $250,000 $37,500/$50,000 • $1M $150,000/$200,000 • $2.5M $375,000/$500,000
  7. 7. An Employee-Owned Company No More Than an 85% Expense Rate • Expenses/Gross Income • Less is Better • $1,000,000 Income X 85% = $850,000 • 65% - 85%.........
  8. 8. An Employee-Owned Company $ Debt/Cow • $3,000 - $5,000 • $7,000 Max Special Terms • Debt/CWT # of Milk $20/CWT • Less is Better • Is Borrowing money Bad? • $1 Invested $1 Gross Income Each Yr
  9. 9. An Employee-Owned Company At Least 30% Equity • Net Worth/Total Assets • $200k/$500k = 40% • More is Better
  10. 10. An Employee-Owned Company 3 Year Asset Turnover • Total Assets/Total Income • $1M Farm/$350k Income = 2.8 years • US Farm Average 4 years • Low number Better 1.5 years • How about high price land? • What value should I put on land?
  11. 11. An Employee-Owned Company 8% Return on Equity (ROE) • Net Income/Total Assets • $80,000 Net/$1M Assets = .08 or 8% • Higher Number is Better 15%.... • Earned Income not “Appreciated” • After Family Living, Taxes, Other Expenses
  12. 12. An Employee-Owned Company Know Your Cost of Production! • All Expenses / CWT Milk Sold • $400,000/23,000cwt = $17.39 • $16.50 - $21.00… Range • 90% From Milk, Enterprise • Cash COP = Expenses, Principal, FL • Accrual COP = Expenses, Depreciation, FL
  13. 13. An Employee-Owned Company Can I Bend a Few Rules?
  14. 14. An Employee-Owned Company “You Can’t Break the Rules” • 2:1 Liquidity • 20% of Milk check to pay P&I • 85% Expense Rate • $3K-$5K Debt/Cow • +30% Equity • 3 Year Asset Turnover Rate • 8% ROA (Profit) • Know Your COP

×