Your Operation Throught The Eyes Of A Business Consultant

Marla Conley has every intention of keeping pace with her peers in the hog business when comparing her records to theirs. As good as others give her credit for being in terms of analyzing records to spot problems, she's not willing to risk doing it alone. She uses business and management consultants as extra eyes to see what she might miss.Conley's operation is farrow-to-finish with more than 900

Marla Conley has every intention of keeping pace with her peers in the hog business when comparing her records to theirs. As good as others give her credit for being in terms of analyzing records to spot problems, she's not willing to risk doing it alone. She uses business and management consultants as extra eyes to see what she might miss.

Conley's operation is farrow-to-finish with more than 900 sows near Cherokee, IA. It was a 150-sow business when she bought it from her parents, Jerry and Micky, in 1988.

She uses both Iowa Farm Business Association (IFBA) and PigChamp records.

"PigChamp gives us the daily production information we need," she explains. "The Iowa Farm Business Association and Iowa State University (ISU) Swine Enterprise Analysis records are what I depend on for the financial and long-term production records."

She depends on Tom Thaden, IFBA consultant, Sheldon, IA, for much of the analysis and problem-solving. He works with hog producers ranging in size from about 50 to 1,600 sows.

But there are approximately six other "business consultants" and a peer group she says she depends on in addition to Thaden.

"My veterinarian, Steve Sonka, is one of them," says Conley. "He knows the whole pork operation on production as well as health.

"Plus, he gets his clients who have similar operations and all use PigChamp together periodically," she adds. "Doc distributes everybody's records without names and tells what he thinks the different producers are doing right and what needs improvement.

"Then we start talking and asking questions like, 'How did you do that?' and 'How can I do that?' " Conley adds. "With that process, I have to consider those guys as part of my team of business and management consultants.

"I have to be pretty hard on myself if I want to keep up with those guys," she adds. "They are excellent producers."

You can get the idea from Conley that part of the reason her business thrives is because she thrives on that competition.

Outside Eyes "I think it is extremely valuable to have an outside set of eyes come in to scrutinize your business," says Mike Duffy, an ISU economist. "We have a tendency to see what we want to see and believe what we want to believe," he explains. "If I believe, for example, that I am a really top farrower, I may rationalize away that my farrowing numbers are more average than where they should be.

"A consultant worth his pay isn't going to pull any punches," Duffy adds.

"The consultant is not emotionally involved like the producer is. That often makes it easier for him to see what is good and what isn't."

Conley relied on consultants to keep her on track as she expanded. "Doubling from 150 to 300 sows was the first little step that required labor and raised the question of whether or not I could manage people rather than just pigs," she says. "Then, as I continued to grow in numbers, the question was if I was sacrificing quality for quantity."

Having somebody else to help watch those things can build your comfort level on a steep learning curve as you expand.

Compare To Peers One of the tools Thaden finds to be extremely valuable is that the IFBA records from their clients are summarized by the IFBA state office and the results are put in categories of the top, middle, bottom and the average of all. Their data is only available to their members.

Iowa State University does publish a Swine Enterprise Records Summary compiled from records of more than 100 producers.

Producers get to see their results side-by-side with those averages. Understand that the IFBA and the ISU Swine Enterprise Records summaries are two separate things. The IFBA has consultants who are hired by farmers and are not a part of ISU. Conley has the advantage of being a member of the IFBA and uses both those records and the ISU records for comparisons.

"I like to do a comparison of my records to the averages because I know those producers are keeping the records like I do and, therefore, it's an accurate comparison," says Conley.

"The best use of those kind of records is to look at your own results and see how you compare with the top 10% area by area," says Duffy.

"Then look where you're not in that top 10% and concentrate on the ones that are going to give you the most improvement from the time and/or money spent."

Areas where you're weak may be ones where you have less interest. They may be harder for you to spot. That's where that more detached, outside set of eyes, the consultant, may be your best bet.

"Another advantage a consultant can bring to a business is that he or she has the opportunity to see a lot of other operations that are similar to yours," says Duffy. "Talking to a lot of different producers is going to give that consultant insight to how you might make changes that will improve performance in your business."

Through The Consultant's Eyes Tom Thaden's first look at an operation is to study the dollars and cents that business is producing on an accrual basis, adjusted for inventory changes. That gives him "true" profit or loss as compared to a cash flow or income tax return view.

"That has to be the starting point," says Thaden. "Then you can go into the details to see where the problems are."

Thaden gives examples of problems and the process he uses.

1. We might see that accrual dollars produced per cwt. number being too low. Here are areas we would look for answers:

* Perhaps high-priced, purchased breeding stock is not giving a good return.

* Are death losses too high?

* Is selling price of sows or butchers low compared to other producers?

* Has inventory valuation changed?

2. Are feed costs too high?

* Look at finishing weights. Are you feeding the kind of hogs that can stay efficient to that weight?

* Look at quality of hogs. Leaner hogs are more feed efficient.

* Consider litters/sow/year.

* Thaden looks at average sow selling weight because he can often correlate that to poor herd feed efficiency. High sow weights also cost you because you get poor production out of those sows.

* Is there feed waste that's caused by poor quality feeders or poor feeder management?

Thaden says he goes down the list to see what costs are out of line as compared to both peers and/or past performance.

Duane Bennink, state coordinator of the IFBA and its consultants, says there's no way to accurately measure the results of having a production and business consultant. Fees that farmers pay IFBA consultants will range from $300 to $1,200 in most cases and can be more for those who want more service.

"We like to think we can give everybody a return of at least double the money they spend," says Bennink. Where consultants have uncovered some serious problems, whether with crops or livestock, the payoff has, of course, been many times that.

"Many of our producers say it is worth the cost just to have an unbiased person who isn't selling anything to bounce around ideas," says Bennink. "Sometimes the consultant simply helps keep them from making a wrong decision. How can you measure the value of that?"

For Conley's consultants, and herself, the pressure to find answers starts from her goal to consistently stay above 22 pigs weaned/sow/year.

"I consider it so important because it affects so many things such as return per hour of labor, feed efficiency and reducing fixed costs per head," she explains. "A lot of it is how hard you push the (farrowing) crates and that depends on how early you can wean them and still get good performance in the nursery.

"You can wean at 12 or 13 days and really push those crates. But then the sows may not breed back. You need to have your head into the big picture where you know how many pigs the finishers will hold and you back into the number of sows to breed so you keep the pig flow schedule going to fully utilize the facilities but not overcrowd," she explains.

But you don't reach goals by pushing that hard without some consultants to advise you along the way, she adds.

"I don't like to try to put a dollar figure on return from using consultants, but I'm sure there are businesses out there that, with some changes, could make $10,000 to $40,000 or more difference in their net income," Thaden says.

Conley measures it this way: "The finetuning we had done in previous years made last year (1998) less painful."

She went into the down cycle with production performance high and costs low, compared to a lot of producers. While that did not keep some red ink from flowing, it didn't cut as deep as it did for producers who went into the cycle in the middle or bottom one-third in production performance.

"As a member of my peer group said to me: Stay focused; keep the main thing the main thing," she adds.

Copies of the Iowa State University Swine Enterprise Records Summary are available by writing to:

Swine Extension 109 Kildee Hall Iowa State University Ames, Iowa 50011

The 1998 summary is available. You can also ask for summaries from previous years.