Power of Management

A couple of weeks ago, I received a nice note from an alumnus of the Ranching for Profit School. He tracks his net worth annually by looking at his balance sheet and has been doing this for some time. You need to be careful when looking at net worth from the balance sheet in isolation, as a run-up in asset valuation that a balance sheet can show has little to do with management. However, the balance sheet is a good measure of value creation when taking asset appreciation into account. In the case discussed below the change is due to management and not just luck of the asset valuation. It’s exciting to see this young man’s change in net worth is due to  “a change in how I thought about everything”. Here’s an excerpt from the letter:

I was just doing my balance sheets for the end of the year and saw something significant. The chart below is our personal equity (which is mostly the business), it’s been 5 years almost to the day since I took [the Ranching for Profit School] for the first time, January of 2019. Look at the chart below. It’s mind blowing! It’s almost a vertical line after I took the school. There is absolutely no denying that one week was an absolute turning point in my life, business, and career. In 5 years, our equity has multiplied by 3.77 with no sign of stopping or even slowing down. I was doing ok before the school, other than heavily subsidizing the business with backlabor, but I am 100% confident I never would have seen the change of direction had I not been challenged to change how I thought about EVERYTHING! It really comes down to the mindshift of planning for a profit. It is like setting the GPS for your destination. Without a destination your just driving around. The wild thing is that I made all the changes on the asset side, it wasn’t that we paid down a bunch of debt. I paid down bad debt, and learned how to use OPM (good debt) to invest in current assets that produce very positive cash flows.

Feel free to share this story, as it may motivate someone that was where I was a few years ago. The proof is in the pudding, as they say.

All the best…

Key points to me are the importance of planning for profit and shifting mindset around the business. My hat goes off to this young man for having the courage and follow through to do the work ON the business and for his disciplined approach to running his business. He gives Ranching for Profit a lot of the credit, but it would have never happened had he not changed his paradigm around his relationship to his ranch. Before it was his job. Now it is his business.

I encourage you to track some key metrics like this for your business and to reflect on your progress. If you’re not making the change you’d like, perhaps it’s time to change your mindset. In his book The Turnaround, Dave Pratt describes a ranch family that does just that, turns it around like the young man from the letter in this article.