Think Beyond Profit
Congratulations! You’ve just come through record cattle prices, you took Dallas’ last ProfitTips to heart, and now you’re sitting on a pile of money and wondering “what now?” There are many negative paradigms surrounding money, not only within agriculture, but within our society. Those paradigms have limited our ability to discuss money freely and openly. Want to break a paradigm today? Here’s a few thoughts on how to handle money.
- Know the terminology. In the Ranching for Profit School and in many RMC resources, including ProfitTips, you’ve found several uses of profit that we have identified and recommend. Things such as: pay down debt, build a rainy day fund, invest in your people, contribute to a retirement fund, expand the business, or invest in the business. These are all great uses of profit. However, at some point, as you expand your business to fit your vision by investing in the business to build capacity, and filling a warchest with cash, you will have come to see many of the other tactics as being EXPENSES rather than uses of profit. When you are to this point, asking somebody how to invest profits will be very frustrating for you, as you will get advice that reflects some form of the uses of profit mentioned above. What you should be asking is “how do I manage wealth?” That question will help you begin the process of building a team.
- Build a team. You didn’t build wealth by managing money. You built wealth by being an excellent farm or ranch business owner. You also probably didn’t do that alone. You had a whole team behind you. Executive Link board, business coaches, accountants, nutritionists, geneticists, and many others provided you with great information so you could make great decisions. Those same people are not money experts, you will need a team of financial advisors and money managers to feed you great information so that you can now make great money decisions. Note that I said, “to feed you great information.” I didn’t say that you need a person to handle your money. Some financial advisors, investment brokers, and fund managers will ensure that your money works for you, while others will make sure that your money works for them! Today, we have a whole suite of tools that allow us to manage our own portfolios. Using those tools and simply using the professionals for advice may be a great strategy to preserve capital
- Money wants your attention. It might be tempting to just turn your money over to someone else to “worry” about. Money tends to follow those who follow it. If you want to keep your money, you must give it your attention. It doesn’t require very much attention, don’t be scared that having money will impact your ability to manage your primary business. You just need to be involved enough to get the required information that will allow you to make great decisions. Check in with your money managers to find what you can do to alleviate inflation pressure, check in with the business owners you’ve invested with to understand their plans and vision, check in with your CPA to understand tax implications. When you leave your money alone, it tends to follow those that are caring for it.
- Money is just an idea. Money seems like a thing, most easily recognized in the form of dollar bills and coins. But money is energy, capable of transforming itself over and over into new and novel forms. At some point, the device you are reading this on was a number in a bank account. Your tractor can easily become a set of cows, which produce a calf, which becomes money in your pocket. Money loves to be transformed. When money sits in a pool it becomes stagnant and loses momentum. When it is deployed frequently, the energy builds and creates momentum, recruiting more money to move with it. Kind of like creating movement in a herd of cows. Once a little group starts moving, more cattle follow of their own will. Don’t misunderstand me, spending money on liabilities doesn’t create energy. Spending money on assets creates energy. So does donating to great causes. When we give to groups, events, and causes we believe in; we create more energy.
- NOW you can diversify. “Find one or two enterprises that are creating exceptional margins and focus on those.” You heard some variation of this in our Ranching for Profit School. For your business, that is a principle you can, literally, take to the bank. For your wealth, though, diversity is an option. Diversity may be the protection you need to turn your wealth into generational wealth. There are low risk vehicles that are great for security such as high yield savings accounts or certificates of deposit. There are also moderate risk, moderate yield vehicles such as stock certificates and real estate. Or there are high risk, high yield options such as investing in somebody else’s business or even starting a new business of your own. Markets are volatile and the “enterprise mix” you choose will be dependent on the goals you have for your wealth and your own risk tolerance. There is no one size fits all recipe for investing wealth. Warren Buffet loves stocks, Mark Cuban loves CDs, and Robert Kiyosaki loves real estate. Some people … get the duct tape out, I don’t want anybody’s head exploding … are even investing in COWS!!!
These are just a few ideas and thoughts that my mentors have helped me develop, but like I said in the beginning, we have serious paradigms around wealth discussion. So, we’d love to see your own wealth management strategies in the comments below!