Kohl: Attitude key to economic strategies
By Sue Dieter
There's a lot of doom and gloom when it comes to economic news.
But ag economist David Kohl told a crowd in Morris that there will also be more opportunity, especially in agriculture, in the next 10 years than there has been in the past 30.
Kohl is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel in the U.S. and Canada, conducting ag and banking seminars and speaking to producer and agribusiness groups. He spoke to more than 200 people at the Old Number 1 Southside on March 24. His presentation was sponsored by AgCountry Farm Credit Services and Ridgewater College Farm Business Management Program.
Kohl said the current economic situation requires big league management.
But he insisted, "It's up to you how well you do in this. Your attitude will determine a lot of your success."
"You can take your check book balance at the start of the year and I can pretty much judge what it will be at the end of the year, and that will depend on two things - the information you are exposed to and the people you associate with," he said.
"Dealing with people is like a bucket of crabs. When one crab gets close to getting out of the bucket, the other crabs pull him back down. You are going to find people in agriculture who are going to try and bring you back down and then you are going to have people who are going to try and drag you up."
Kohl has a list of five key elements for weathering the current economy.
Cash topped the list. Kohl recommended having at least six months of income available in cash. If there are two wage earners, they should have at least 12 months income in cash. People will earn returns on money market or savings accounts, even if they are small.
Second, Kohl talked about liquidity. He recommended strong reserves of working capital. Budgeting and planning will be critical, but he said people have to carry out their business plans.
The third element is resourcefulness. Kohl said that managers sometimes focus on what's urgent instead of what's important. He did predict that people will re-examine their priorities in business, family and personal lives.
Innovation is another key element. Kohl said those who succeed will be quick learners who have good work habits. He stressed that in these times, people can't afford to have lazy assets.
"Every now and then you need a good recession to clean the riff-raff out of town," Kohl said.
"A lot of business opportunities will come at you, but you need to be selective."
Kohl said a strong business plan allows for test scenarios for new opportunities. But he also cautioned, "If it grows too fast, it's a weed."
Kohl urged his audience to make themselves "bankable." He noted that not everyone has the right to own a home.
"You earn that right through prudent financial management and a sound lifestyle."
He also pointed out that the housing situation will improve when the right kinds of houses are built.
"McMansions" are no longer "in." Energy efficient, simple and maintenance-free homes are the wave of the future, much like the trend in automobiles.
Kohl also spoke about the stimulus package that the Obama administration has put in place,. He called the plan a Band-Aid.
"About 80 per cent of that is wealth transfer," Kohl said. "You cannot socially engineer an economy. I'd like to see the president put together a business plan with a balanced income sheet."
He also warned that special interests will have more impact on the ag economy than any politician.
But Kohl said tough times bring out innovation.
"Some of the best business models were made in the 1930s and 1980s."