Planning a new dairy, or major changes to an existing dairy, is a very important and time-consuming undertaking. Close adherence to the seven-flow philosophy "Strict attention to: cow flow, people flow, equipment flow, manure flow, feed flow and air flow will result in a positive cash flow" often helps insure facilities are designed to provide cow comfort, worker comfort and operating efficiency.
 
Plans should be reviewed before any contracts are let to minimize the potential for cost over-runs, shortages and bio-security-related incidents.
 
Cost overruns of 10-15% are common with major construction projects. The three major things to consider, to prevent cost-over-runs, are 1) get firm contractor bids; 2) don’t expand the scope of the project after contracts are let; and 3) try to include all the miscellaneous equipment and services that will be needed.
 
Historically, major expansion projects have experienced shortages in manpower, replacement animals, feed and capital. Often the owner(s) underestimate the amount of management time needed to organize and run a dairy during the building and start-up phases. Extra worker and management time should be included to help insure a successful transition into the new facility. Culling rates the first year of operation of a new dairy can range from 15% to over 40%. Higher culling rates can be caused by older cows not adjusting to the freestall environment, poorly finished concrete surfaces which affect feet, selection of poor heifers that are poorly grown or not accustom to freestall housing. Factoring expected culling rates into cash flow projections is important to insure sufficient start-up resources are available. When estimating the amount of feed needed for the expanded dairy, true crop yields, field losses, fermentation loses and feeding losses must be included. Having sufficient capital reserves to purchase feed and supply inventories, plus cover any cost-overruns in vital to the success of the dairy.
 
Attached are two different summaries of dairy expansion projects pitfalls. Review of these lists can help a producer identify overlooked areas. Some key issues to consider during expansion are:
 

1. Planning any expansion should start with an understanding of what is happening in the industry and what the long-term goals of the owner(s) are. Weather a step-by-step expansion or a major expansion is planned, the homework needed and the long-term plan should be identical. Whatever is planned now, it should be the first step toward completion of the operations long-term plan.

 
 
2. Once a facility is finished, the faster it can be utilized the better cash flow and profitability will be. Don’t try to grow into a major expansion.

 
 
3. Evaluate the amount of time you will need to manage your existing operation and any expansion activities planned. Shifting some responsibilities to other family members and consultants should be considered. In most cases, hiring a construction manager is money well spent.

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