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Dr. David M. Kohl Professor Emeritus Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24060 (540) 961-20

Nuts & Bolts of Business Turnarounds. Dr. David M. Kohl Professor Emeritus Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24060 (540) 961-2094 (Alicia Morris) (540) 719-0752 (Angela Meadows) e-mail: sullylab@vt.edu. Weekly Website Columns :

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Dr. David M. Kohl Professor Emeritus Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24060 (540) 961-20

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  1. Nuts & Bolts of Business Turnarounds Dr. David M. Kohl Professor Emeritus Agricultural and Applied Economics Virginia Tech Blacksburg, VA 24060 (540) 961-2094 (Alicia Morris) (540) 719-0752 (Angela Meadows) e-mail: sullylab@vt.edu Weekly Website Columns: Ag Globe Trotter: www.farm-credit.com Road Warrior of Agriculture: www.cornandsoybeandigest.com

  2. Viability of Dairy Industry in Northeast“Keys”

  3. Is Your Business “Farmcreditable / Bankable/ or FSAable?” • Do you know your cost of production? • Do you conduct enterprise analysis? • Do you complete and utilize accrual adjusted income statements? • Do you have accurate up to date balance sheets? • Do you utilize key financial ratios in your business planning? • Do you have a three prong risk management program? (revenue, inputs, & interest rates) • Do you conduct sensitivity analysis on cash flows? • Do you communicate if you have problem? • Do you meet key metrics, ratios, & credit scores? • Do you utilize a business plan?

  4. New Economic Realities- Financial Metrics

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  8. Signs of a Dairy Business in Difficulty • account payables / supplier credits > 10% of revenue • constant refinancing of operating loans • not covering variable cost of production- more than six months • not covering total cost of production- more than eighteen months • annual loss of earned net worth more than 10% of total net worth • operating expense to revenue ratio (excluding interest and depreciation) over 85% • interest paid revenue ratio over 15% of revenue • percent equity under 30% • credit scores under 650 • have more than five different sources of credit on balance sheet

  9. Financial Profits Diagnosis Worksheet

  10. Management Diagnosis Worksheet

  11. Turnaround Strategies • divide cost of production • variable • fixed • total cost • earned net worth vs. appreciated net worth strategy • monthly & quarterly variance analysis • actual • projected • year over year • macro / micro • quick victories to build upon • meeting management • partners, spouses, lenders • agendas • minutes • assignments and to do lists • focus on larger costs • SWOT analysis • prioritization of goals • business planning, execution, and monitoring

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