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Dr. David KohlBy Dr. David Kohl

At a recent customer appreciation dinner, I commented that this economic era was reminiscent of the late 1970s. For those too young to recall those times, inflation was hot, in the double-digits. Uncertainty in global markets due to geopolitical and military unrest was a daily headline. Oil prices were spiking and storm clouds concerning the direction of national policies were front and center. This certainly sounds similar to the current domestic and global environment, which is accelerated by the flow of information and magnified by the power of technology.

How can an individual manage a business in this environment? Digging deeper, what are some of the strategies one can utilize in an environment best described by the famous country singer Patsy Cline’s song, “Crazy.”

Focus on the Financials

Once per year drive-by financial statement preparation and analysis for tax purposes will not be sufficient. Inflation, which appears to have some permanent legs due to energy uncertainty and built-in labor contracts, can accelerate both good and bad decisions. The development and monitoring of cash flows, ideally monthly or quarterly, will be critical to maintain the balance of rational and emotional decision-making.

Three Points of Emphasis

Three points of emphasis must be maintained in strategic and operational management. First, a marketing and risk management program that capitalizes on wide parameters of price outcomes. This requires one to know the cost of production, profit points, and how crop and other risk management programs can protect or generate net income streams. Next, line by line management must be developed and monitored for each enterprise. Shortages of key inputs require the development of adaptive strategies and considering plans A, B, C, and D. Finally, implementing an interest rate strategy and the potential impacts to the bottom line will be a necessity. 


A good set of financial spreadsheets with production, price, cost, and interest rate scenarios will be a focus. On a special note, if you do not know how to develop and utilize spreadsheets, get a young person to help you. It will also provide them with a valuable experience. If your school system or educational institutions are not teaching spreadsheets, the administration needs to be called out. The ability to use and understand spreadsheets is a must for businesses, households, and personal finances.


What causes financial turmoil for an economy, individual businesses, or households in both the 1970s and today’s economic environment? The answer is the lack of financial liquidity. Priority number one is to get your business and personal balance sheets very financially liquid. A current ratio of 2:1 and working capital of at least 25 percent of expenses are benchmarks to maintain. Maintaining working capital of three times annual principal and interest payments on term debt is a new financial metric that is being utilized in businesses that are growing and utilizing debt capital. For households, maintain four to eight months of living expenses as cash. Remember, financial liquidity provides flexibility and adaptability to block adversity and capitalize on opportunities.


Similar to the late 1970s, this will be an environment of accelerated business transition due to uncertainty. The old song by Crosby, Stills, Nash, and Young, “Teach Your Children” is still appropriate. Incrementally allow the younger generation to ‘cut their teeth’ on managing finances for part of the business. The transition process can take up to a decade to achieve, even with the assistance of a facilitator or business coach. Make sure all of the transition documents are in writing. 

Finally, take care of yourself. Shut off the technology and meditate or hear the silence for two hours per day. Exercise regularly and maintain a sound diet and a support network. Your support network could be people or even animals as long as they help you keep a positive attitude. While the aforementioned points do not guarantee success, it puts the odds of success in your favor and can bring you peace of mind in your business or personal life.


Dr. David Kohl energizes agricultural lenders, producers, and business professionals with his keen insight into the agricultural industry through extensive travel, research, and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, VA. Dr. Kohl has traveled nearly 10 million miles in his career and conducted over 6,500 workshops and seminars for a variety of agricultural audiences. Additionally, Dr. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy. 

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