Ag economist advocates creating focused business plans, playing to business strengths

By MATEUSZ PERKOWSKI

Capital Press

In the past year, agricultural economist Dave Kohl has traveled enough miles by airplane and rental car to circle the earth roughly 13 times.

Though his schedule is hectic, working the lecture circuit has at least one advantage over teaching economics full-time to university students.

"You know what I like about guest lecturing? You don't have to grade papers," Kohl said during a recent stop in Salem, Ore.

Kohl delivers about 100 speeches a year, most of them related to agriculture and how the industry is shaped by the economy.

A take-home message Kohl conveys to his audiences -- typically farm groups -- is not to get distracted by the dizzying pace of change in the agricultural industry.

"Step back from it," Kohl said.

Mechanization, genetic engineering and information technology have revolutionized agriculture, but the fundamental rule of successful farming remains constant: Develop a sound business strategy and stick to it, he said.

"Business paradigms change, but business principles don't," said Kohl.

Kohl's reputation as a speaker has been built on correct predictions, such as the unsustainable rate of growth in the housing market and the high likelihood of a downturn in commodity crop prices, said Jay Penick, CEO of Northwest Farm Credit Services.

Apart from the accuracy of his observations, Kohl has the ability to explain them without inducing confusion -- which is why Northwest Farm Credit Services regularly hires him to speak to clients, said Penick.

"He speaks the language that agricultural producers have an understanding of," Penick said. "Dave does a really great job of responding to questions and inviting questions during the presentation."

Having grown up on a dairy farm in upstate New York, Kohl always maintained an interest in agriculture and decided to study the industry's economy as a community college student.

He eventually earned a doctorate from Cornell University and was hired as an agricultural finance and business management professor at Virginia Tech in Blacksburg, Va., where he worked for about three decades before retiring in 2003.

Kohl discovered his gift for public speaking when a professor at Cornell asked him to deliver a lecture. His economic repertoire gradually grew in popularity until guest speaking practically became a second profession.

"It was basically word-of-mouth," he said. "I never advertise."

When it comes to business management ideas, Kohl has not been afraid to put his money where his mouth is.

In early 2004, he took an interest in a vertically integrated dairy company that was hemorrhaging about $40,000 a month.

"It was like going through a new pickup every month," he said.

Although the Homestead Creamery in Wirtz, Va., was losing money, Kohl thought the dairy's idea of delivering milk in glass bottles had a nostalgic appeal that could succeed.

After buying into the company as a co-owner, Kohl helped put together a plan to reverse its deteriorating financial condition.

Throughout that year, the monthly losses became smaller and smaller until the company actually earned a profit -- $300 -- in November 2004.

Five years later, the firm's annual profits are now in the six figures and have continued to grow despite the recession.

"He probably came into the business at our toughest time and helped us get it turned around," said Donnie Montgomery, Homestead Creamery's president and co-owner.

Before Kohl stepped in, Homestead Creamery didn't have a detailed business plan and was spreading its resources too thinly on a large variety of dairy products, Montgomery said.

Kohl helped the firm identify products that earned the least money, which were then dropped from production. That allowed the company to focus on more profitable ventures such as bottled milk and ice cream.

"We were probably trying to do too much, too many products, and not being as effective as we should have been," Montgomery said.

The company has followed another Kohl precept: Beware of unrestrained growth.

Wal-Mart wanted to stock Homestead Creamery's products, but the offer was turned down because the dairy would have had to quadruple its production -- a major strain on financial and managerial resources, Kohl said.

Kohl uses the Wal-Mart example to underline the importance of avoiding distraction and adhering to the plan.

Too often, companies struggle because they don't have direction. Kohl's goal is to help them survey the landscape and map out the right course.

"My management style is to bring people together and get out of the way," he said. "I'm what I call a coach."

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