Monthly Archives: April 2013

Magneto and Kid

When I was a little boy, my parents owned a tractor business; they sold and traded and worked on all kinds of equipment. I’m guessing I was about 5 or 6 years old when dad gave me a magneto out of a tractor. He told me it had a “short” in it and I could play with it. Well, when I wasn’t painting something, (my favorite thing to do at the store) or getting into trouble some other way, I was playing with the mag. I was fascinated with it. It had a steel shaft that you could spin and a long copper wire that would zap anything that was conductive, including people, when you spun the shaft. I quickly learned what a “short” was, because when you were twisting the shaft to get up sufficient rpm’s produce an electrical shock through the wire and kept contact with the shaft too long, it would zap you through the shaft. This was an art at which I was intent on mastering! This was very similar to the one I had; it weighed about 10 pounds.

Magneto

Magneto

Dad had a mechanic named Shorty that worked there, so I decided I would practice on him. You couldn’t just walk up to someone, attach the wire to their exposed skin, and hold and spin a ten pound mag while they stood there patiently waiting for a high voltage zap. So I had to be creative. In his spare time, dad had Shorty working on building a new trailer. At this point the frame was complete, and they had rubber tires on it. So, it wasn’t grounded. Perfect! I waited til Shorty was ready to work on the trailer, and as he was welding on the front of it I crawled under the back and attached my wire to the bare metal and spun the mag. He immediately stopped welding and pulled his hood up, rubbed his arm, checked his ground clamp, and put his hood back down. As he started to weld again I put a quick spin on the mag. He dropped the stinger, threw off his hood, and I learned some new four letter words that day. I never have figured out how he knew I was back there…maybe I giggled too loud? After that, Shorty and I came to an understanding, and I had to find another target.

One day, dad was sitting in front of the office on a couch talking to a man about buying a new tractor, and I thought hey, this has possibilities. The couch was sitting up against the office wall, and the wall was hollow. It was a 2×4 stud wall with wood paneling on the outside of it. Anyway, dad was talking  (for what seemed like forever) to this guy, and I was climbing all over the couch and bumping into him. Just messing around, like any boy my age was bound to do. After a while, dad leaned back and locked his fingers behind his head. It was a warm day, and he had on a short sleeve shirt. I had the mag laying on the couch and held the wire up on the tender underside of his bare arm, sort of opposite his bicep, and spun the mag. There was a picture hanging above dad’s head on the wall. When the shock hit him I guess his reflexes kicked in, cause he hit that wall hard with his fist; that’s when the picture fell down and conked him on the head. The wall, being hollow, made a really loud bang when he hit it, and after the picture fell, the customer and dad and I all just sat there for a few seconds trying to grasp what had happened. (I had a better idea than anyone else did…) Then the customer busted out laughing, and that was my cue to make a fast getaway. Dad stood up and hung the picture back where it belonged and sat back down to finish the deal with the guy, and I didn’t stick around to find out if he made the sale or not. I am assuming he did, because I never got in trouble for that stunt. However, my mag disappeared that day and I never saw it again.

Needless to say, I was very careful what I gave my kids to play with. I am a little apprehensive about posting this because my dad will probably read it and I may get in trouble yet.

 

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Exit Strategy

images You just walked walk into a building; let’s say you went to a mall to go shopping. When you are ready to leave, all you have to do is look up until you see an exit sign. All public places have exits appropriately marked so you can get out any time you wish, and the people who designed the building put them there. Well, guess what? When you start a business, you need to have an exit plan. It doesn’t matter what kind of business it is; you need to begin with the end in mind. Think about it: after a while you may want to do something else, or retire, or you may have health issues or any other number of things that could cause you to want to get out of that business.

Here are some things to consider when mapping out your exit strategy:

1. Do you plan to sell your business as an operating business, or will you just close it and sell off the assets?

2. Do you plan to pass it on to a family member? (I’ll cover succession planning in another post)

3. Is your brand built around you, and when you are no longer there will it have the same value?

4. What are some key points that would make your business marketable?

Just because you own your job and have poured 20 years of your life into it doesn’t mean that somebody will pay you for it. It’s up to you to create that value if you plan to market it. I have owned 3 businesses in my life and only 1 of them had an exit strategy, and it governs everything I do in that business. Take purchasing decisions for example. If I buy that, will it add value to my business, or will it depreciate and devalue the business? If that’s the case, will I have to sell it separatley, or is there any market for it at all? Maybe it would be better to lease that particular thing instead of owning it. I know some of the things that you need to operate the business are going to depreciate; but make sure you don’t have all your money tied up into things that are going down in value, or you might end up looking like this guy.

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Your exit plan, like your business plan, can be changed over time. I can guarantee it won’t be perfect, but the fact that you have thought about it, written it down, and have it in place will guide you toward your exit. When it comes time for you to exit, you’ll see that basically everthing is in place for you to do so. If something were to happen to you, your family would have the plan and know how to wrap everything up.

Remember, it’s your building. You designed it, and you get to put up your own exit signs. If you don’t, you and all your employees and family may be wandering around in there looking for a way out! Trust me, it’s a lot easier to follow the signs!

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Grow with Cash

 

Uncle Ben

Uncle Ben

Without a doubt, the single most important business decision I made was to NOT borrow money! I know it seems a lot easier to get everything you need at the onset by taking on debt, but trust me. It’s not. I’m a big fan of Dave Ramsey, and one of the things he always says is “I’ve done stupid with zeros on the end”, and so have I. It’s true, you grow more slowly by paying as you go, but I have learned so much along the way about keeping it profitable and really scrutinizing a buying decision before I spend my hard earned cash. I am convinced that had I borrowed money, the learning curve would have been too steep, and I would have crashed along the way. There is such a freedom when you don’t have to worry about making a payment on time. Or worse yet, having a bad year and not being able to make the payment. That just takes all the joy out of it. I know you can get in trouble without debt, but it’s a lot slower process, and you probably won’t foreclose on yourself.

The other thing that is very important in any sized business is a business plan. Your business plan is the road map to your success. It took me about a week to write my business plan. There is a lot of information and thought processing that go into one, but it’s totally changed the way I think about business. My favorite part is the projections. Where are you going to be in 1 year or 5 years? What does that look like? How many cows will you have? How many acres will you need? It’s all there written down in the business plan. You may think about making a change to your business and that’s great; go to your business plan and see how that fits. Can it be easily implemented into your existing plan, or will it totally change your course? Are you staying on course with your current plan, or have you gotten off track? It just takes all the hand wringing and guesswork out of it. You can very quickly look at where you are and compare that to where the business plan map says you are supposed to be. If they are different, then you ask yourself if you like it better where you are or where the plan says you are supposed to be. Then, you start making adjustments to get there. By the way, there is a lot of information about business planning out there that is free. I downloaded my form here, business plan template, and customized it down to a 12 page document.

The other important piece of the puzzle you need is a separate checking account. (Separate from your household account.) It just keeps things cleaner, and it makes it very easy to track expenses and cash flow. Keeping your checkbook on your computer with some type of software is by far the easiest. When I’m going through my budget and projecting growth for the upcoming year, with just a few clicks I can look in detail at up-to-the-minute financial data. 2011-12 were drought years for us and our expenses. Inputs were up unusually high for those two years, but with my checkbook records I can tell you exactly how much it cost to run a cow last year. It’s not a “rough ballpark idea”, it’s an exact number that is accurate. I can also look and tell where those expenses came from: not just feed, but hay, or extra rented grass, or water. The more informed you are, the better you can make a decision, and records are golden information.

You may be like me and think that you are a lot more productive out actually doing the work than you are sitting at the computer keeping up with all the data, but you and I are wrong! The data will make you so much more efficient at doing the work that it will actually add to your bottom line profit. I’ll leave you with this quote from well known horse trainer Pat Parelli. “Take the time it takes so it takes less time”.

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Time for Gardening

As the weather starts to warm up, it’s time to think about putting in your garden. I really like to get out and work in the garden, but time seems to always be an issue. So, I have a few tips that will make gardening much easier and less time consuming, and it will actually boost your yields. My garden is small, about 30 by 60 feet, and in addition to that we have 4 raised beds that are 4 by 8 feet. That is plenty of room to supply our family of 4 and allow us to preserve food for use all year round. Here is a picture of me taking the easy way out to work the soil.

100 HP tractor and a 14' chisel plow on a 30 by 60 garden.

100 HP tractor and a 14′ chisel plow on a 30 by 60 garden.

That is cowboy logic at its finest! Okay, so you may not have access to this kind of equipment, but working soil over 8 inches deep will really pay off for you. I recommend you find someone with a tractor or use a hand spade to work the soil deeply.

Another thing I started doing a few years ago was buying plastic film mulch for my plants. If you can see in the picture below, there is a drip line (small brown tubing) coming out from under the plastic. This is a drip tube that I lay under each row before the plastic film goes down. I install a timer on this and a water source, and this allows me to water as needed very efficiently and near the roots.

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With the hot Oklahoma summers that we have, you’ll want to cover the film with hay or a thin layer of dirt to block the direct sunlight and keep the soil from getting too hot. I use hay, and the film cuts my weeding down to almost nothing. Watering is automatic, so I can focus on caring for the plants instead of pulling weeds every time I go out.

Another thing that really prolongs the growing season is a greenhouse. I built a small lean-to greenhouse, and at the end of garden season I transplant tomatoes, peppers and herbs into tubs and put them in the greenhouse for use during winter.

10 by 12 greenhouse

10 by 12 greenhouse

It’s really nice to be able to go out when it’s 10 degrees outside and pick a fresh pepper for your salsa.

Peppers in the greenhouse in January

Peppers in the greenhouse in January

We also start most of our plants from seed and don’t use any rooting hormones, so the harvest is about as natural as you can get. There is a satisfaction that comes from preparing a dish for your family with food that you have grown in your own backyard, not to mention the added flavor. A little time and planning will give you a great garden regardless of whether you have land or not. From a flower pot to several acres, this can be a fun and rewarding experience and a great family activity.

 

 

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