Lack of long-term planning and goal-oriented decision making contributes to each of the 10 biggest mistakes made in expanding a dairy operation.

Where do you want your operation to be in 15 years? How can you grow your business and meet these goals while meeting the everyday demands of the farm?

"When we say dairy modernization or growing your business, we should be really finding a way to increase your profitability and the end result should really lead to an increase in the quality of your life," said Normand St-Pierre. "Running a farm like a business is going to increase the fun you have farming."

Dairy scientist Normand St-Pierre of The Ohio State University spoke at the 2003 dairy innovators seminar held by MFA in Springfield, Mo. According to St-Pierre, before any dairy producer considers expansion and taking on debt, the first step should be evaluation.

Producers should really evaluate the strengths and weaknesses of the operation, including historical animal health issues; condition and design of existing facilities; and efficiency of time spent on the operation.

"Do you have trouble doing the chores you already have? What are the things you are good at? Are you good at growing corn or forage?" asked St-Pierre.

"Then you have generational challenges," added St-Pierre. "Dairying is tough enough, but dealing with the demands of different generations adds an extra challenge to meeting the need for planning," said St-Pierre.

One of the biggest challenges in a family business is figuring out a way to expand the business--while still meeting all of the capital demands and needs of the different generations involved.

"The biggest dilemma with a family business is that each generation has different goals and motivations," said St-Pierre. The oldest want stability of income and less risk; the youngest are willing to risk more for higher incomes. Neither generation is wrong, but in order to make a successful plan each generation must understand the other.

After producers have evaluated the operation, the strategic planning starts. Planning to meet future needs of the family should be the priority, and at all times, the business should be mapped out for the next 15 years.

"All of the 10 biggest mistakes are concerned with planning. Before any concrete is poured, make sure it is where you want to be in 15 years," said St-Pierre. "You need to plan what will happen when the first plans fall through. A second, backup plan is also good."

All new buildings should make labor more efficient. Workers should be able to handle more animals in the same amount or less time. Economies of scale should mean you can make more money in less time.

"You better understand and answer related problems before the concrete is poured." said St-Pierre. "Pouring concrete should be the last step."

A good rule of thumb is that most facilities more than 20 years old should be evaluated against today's standards of efficiency.

St-Pierre identifies the following areas as the most likely places to stumble in expanding your dairy operation.

1. Budgets that are not achievable. Too often, unrealistic and unachievable budgets are best-case scenarios instead of real-life scenarios. It's human nature to work the numbers until it looks right.

2. Building and maintaining cow numbers. In order to maintain numbers after an expansion, it takes an additional 50 to 60 percent of the original number of cows purchased to maintain the new herd population over the second and third year after an expansion. Remember, 30 percent is often the cull rate for cows. It takes 2 years before the first replacement heifers are ready to milk.

3. Holding production levels to pre-growth levels. Production often slips after a major expansion for reasons ranging from biosecurity issues to animal stress.

4. Building delays and cost overruns. Parts delays, contractor delays, weather delays--these things all happen. Build cushion in the time table. Beware of change orders such as timing the pouring of concrete, etc.

5. Manure handling systems. Environmental concerns and licensing can be a challenge. What system are you going to use?

6. The strain of three times per day milking. There are hidden costs in milking the extra time per day. Factor in wear and tear on the equipment and the help.

7. Underestimating capital replacement needs. More supplies, replacement animals and parts will be needed.

8. Underestimating the cost of filling the business pipeline. Increasing the cattle numbers often increases the debt and other expenses.

9. Overestimating management capabilities. Managing more cows takes more time time. Are you up to the challenge?

10. Death or incapacitation of key partner. What if? What is the backup plan for a backup person? Does more than one person know how to run the computerized equipment?

Managing variability in feed nutrition: How much is it worth?
In a perfect world, dairy cows are healthy and the milk tank overflows, all because producers feed a consistent high-quality ration. In the real world, when you feed dairy cows, consistency is very important, but it can be difficult to achieve.

According to Normand St-Pierre, it's feed inconsistency that costs dairy producers money--sometimes robbing the only small margins they can make in the dairy business these days.

"Often it is the last several pounds of milk that makes the profit," said St-Pierre. "It might take the first 50 pounds of production to pay the bills and the last couple pounds is the profit. So, it is important to get that last little bit where you can."

When management practices change too quickly and the feed quality changes as a result, profits may suffer. A frequently overlooked truth is that producers never really know the composition of the feedstuff they purchase. Strict control and testing of inputs increases the stability of the final product. But, such control can't be achieved without frequent feed tests and an understanding of the limitations of testing.

So what is feed consistency worth to a producer's bottom line? According to feed trials at The University of Ohio, a number can be assigned.

"Commercial feeds produced under tight quality control are worth an extra $18 per ton simply from their nutritional variance reduction," said St-Pierre.

Feed trials show that variable rates of protein and energy shave off production, robbing peaks and deepening the valleys in milk output charts.

"MFA Incorporated, uses many ingredients and monitors their analysis. Because of this, they can design a robust ration. And yes, it is worth more," said St-Pierre.