Complacency

Complacency

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You may recall the anecdotal story of an old fisherman sitting on a pier casting and catching all morning. With each catch, he’d pull out a small ruler to measure it. Some fish he’d keep, while others got thrown back. Upon closer observation, we learn that the ruler is broken and only measures to 9 inches; on top of that, any fish that measures more than 9 inches is thrown back while the smaller fish are kept. When confronted, the fisherman admits that his frying pan is only 9 inches in diameter.

When I was farming, on a number of growing years we put up some huge yields, bigger than my dad ever grew. His feedback was, “It’s too much (crop). What are going to do with it? There isn’t enough bin space!”

In both stories, we see examples of where there is a lack of interest or intent to be better, bolder, etc. And if something did not fit the narrow view, it was discarded as being more work that it was worth. Yes, progress brings about new challenges that differ from those we are familiar, but the opposite (meaning status quo) will eventually lead your business into its death-spiral.

Complacency is an incredibly dangerous business condition. You can’t always see it coming. It may be contagious. Treatment is sometimes difficult if sufferers refuse to consider they may be affected. Complacency causes your business to stop growing. It creates an environment where too often heard around your farm are the 6 deadliest words in business: “We’ve always done it this way.”

To Plan for Prosperity

  1. Know what you do best, and keep striving to do it better and better.
  2. Acknowledge what you don’t do well and get professional help with it so that it doesn’t become your Achilles heel.
  3. Recognize that GROWTH is not just size and scale. Seek out multiple ways to grow.

“Do what you do best, and get help for the rest™” is one of the cornerstones of my advisory work with clients. Complacency can be dealt with quickly with the right help, positive results can be had, and the “habit” can be broken.

Focus

Results Focused or Activity Focused

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Most farms will be receiving their year end financial statements from their accountants by now, if not already. Those with fiscal year ends of January 31 or later might still be waiting for their year end to be finalized.

How did your last fiscal year turn out? What were your financial results? If you are results focused, you’ll be paying attention to metrics like:

  • Net Profit
  • EBITDA
  • Gross Margin
  • Return on Equity

Activity focused operations typically don’t review financial reporting, instead directing energy towards:

  • Greasing
  • Shoveling
  • Driving
  • Anything else…

To Plan for Prosperity

There are some who will say that “money and profit aren’t everything.” Don’t listen to them. They aren’t focused on results. Yes, health and family are more important than money because money cannot buy health or a happy family, BUT without profit no one will be happy.

Profit is the fuel for your business. And like the diesel in your tractor, if you’re not making sure you have enough, things are going to stall.

intimate with EBITDA

Be Intimate with EBITDA

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No, not in the literal sense. This is a G-rated commentary…

EBITDA is an acronym for Earnings Before Interest Taxes Depreciation & Amortization. It is your business’ profit from operations. More than just understanding it, being intimate with how it affects your business is critically important.

EBITDA is pure because it does not include the effects of financing decisions (this is why is excludes interest,) accounting decisions (this is why it excludes depreciation & amortization,) and tax environments (this is why it excludes income taxes paid or payable.) It simply shows just how slick of an operator you really are.

ebitda calculation

If your accountant isn’t including this in your financial statements, you can figure it out pretty easily using the formula above. How has your EBITDA been trending over the last 5 years? Have you considered the reason why?

Your lender is keenly interested in your EBITDA. In fact, he or she will calculate it internally and measure it against your total debt payments required in the next 12 months. It is called “debt service coverage” or DSC for short, and is a deal breaker if it doesn’t meet your lenders’ minimum standards.

For many farms, net equity has been on a very positive trend over the last several years. While this is good news, like any news we can’t just take it at face value. What is the underlying story? If equity has been increasing from appreciation of asset values (namely land) and not from retained earnings, then it does not build confidence that the operation is profitable. If the operation is profitable, it is capable of growth and meeting loan repayment schedules (those same loans that help fund the growth.)

retained earnings

If a business is not retaining any earnings within the business, it limits its ability to fund growth, transition, etc.

To Plan for Prosperity

Recognize that EBITDA is the measure of your business’ operating performance. It has a key accountability in growing your business’ net equity. It is heavily relied upon by lenders.

  1. Calculate your EBITDA. Look at how it is trending. Acknowledge what it affecting the trend.
  2. Understand your lender’s debt service coverage (DSC) calculations.
  3. Decipher what has had the greatest inpact on your net equity: appreciation of assets, retained earnings, or both?

Your relationship with your EBITDA should be very, very close; some might even say “intimate.”

 

CYFF

CYFF (Canadian Young Farmers’ Forum)

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Greetings from CYFF

The Canadian Young Farmers’ Forum brings together farmers from across Canada. This past weekend in Ottawa, they held their annual convention and invited me to speak as part of their agenda.

There were many takeaways from the event; here are a just a few, with my perspective following in brackets.

  1. Agriculture is incredibly diverse right here in Canada. (We shouldn’t just stay in our little echo chamber with others who produce the same as what we do.)
  2. Even with such diversity, young farmers face similar challenges across all sectors and across all provinces & regions:
    1. Building and protecting adequate working capital is difficult (I’ll keep preaching the importance of this;)
    2. Profitability is cyclical (we may have heard this before;)
    3. Competition is increasing for land, labor, etc (and they’re stressed out trying to figure out how to handle it;)
    4. Small farms struggle to compete with large scale & well capitalized operations (yes, there are large potato, berry, vegetable, dairy, poultry, & egg farms like there are large grain and cattle farms, and competing with them for land and labor is just as tough;)
    5. Young farmers feel lost when trying to determine if/how their parents ever plan to slow down/retire (this also applies to every other family business, not just farms.)
  3. The desire to learn more and be better is strong (learn, unlearn, relearn.)
  4. The desire to take part in something bigger, such as industry groups with lobby or policy influence, is significant.

CYFF is for farmers under 40. Based on the passion of these young farmers, and their desire to learn & be better at everything they do, I think the future of agriculture in Canada is in good hands.

To Plan for Prosperity

The issues you face, the challenges you struggle with on your farm are the same as almost countless other farms. The relief and comfort seen on the faces of these young farmers when that became evident was obvious. They felt less stressed and less alone when they realized that they are not the only ones feeling the angst, the despair, or the helplessness that dogs their personal situation at home.
Don’t sit alone and wallow in your own anguish over what challenges you in your business. Sharing your trials and tribulations will not only help mentor the passionate successors to our industry, it may help you find comfort in knowing “you’re not alone.” It might even turn up a solution.

change-the-filters

Change the Filters

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Standard practice for those of us who have ever done our own servicing on farm equipment, vehicles, etc, is to change the filters at regular intervals. The oil filters gets changed with the oil; the air filter get changed at least annually, and “blown out” as often as required. We use good quality filters to protect the longevity of our equipment, and to reduce the likelihood of a breakdown.

In today’s connected world, it is far too easy to find ourselves using a “filter” to avoid that which we don’t agree with or want to hear. Instead, we gravitate to those people and opinions that share our line of thinking. Doing so validates our own thoughts and actions, proving that we were right. It also creates what is called a “confirmation bias.” I found a great example of defining confirmation bias at Skeptics Dictionary:

Confirmation bias refers to a type of selective thinking whereby one tends to notice and to look for what confirms one’s beliefs, and to ignore, not look for, or undervalue the relevance of what contradicts one’s beliefs.

If there was ever an obvious real-life example of confirmation bias, take an objective view of the rhetoric right now between proponents and opponents on BOTH sides of the US Presidential Election…if you can stomach it.

Where might confirmation bias affect your farm business?

  • Production
    • agronomic strategy: nobody else is applying fungicide this year;
    • tillage tactics: no-till, min-till, conventional tillage;
    • yields: no one has yielded above 50 in this area.
  • Human Resources
    • can’t find good help;
    • nobody’s worth $20/hr;
    • why train anyone – they’ll just leave!
  • Management
    • bigger is better;
    • asset rich and cash poor;
    • things must still be okay, the loan got approved!

Of course, we cannot fail to mention farm equipment: which brand breaks down more, which is costlier to maintain, which is more efficient, etc?

With so much information available online and elsewhere, it is more important than ever to filter out the noise and rhetoric while not subjecting ourselves only to what confirms our bias. The most successful businesses are open to lifelong learning, getting professional help, and working from a plan (as found in the study titled Dollars and Sense commissioned by FMC and AMI.) Among other practices listed in the study that drive successful farms, these three listed above clearly indicate that seeking to confirm our own bias is not something that successful business people do.

Direct Questions

Social media is a smelting pot for confirmation bias. How do you manage your activity to maintain balance?

Do you enjoy spending time and conversing with people who have different views? Look at your circle of friends, and how you network at events. Does it align?

How do you filter information, to confirm a bias or to expand a perspective?

From the Home Quarter

The notion that our biases will never come into play is not realistic. While a mirror may be the best tool to use when evaluating ourselves, the challenge for each of us is to look beyond our bias and expand our playing field. Listening only to that which confirms our bias can only narrow our view. Stretching ourselves beyond our comfort can broaden our view. With our businesses becoming more demanding, and requiring more diverse skill sets to be successful, which view is better?

Is it time to change the filters?

hide and seek

Hide and Seek: How Perfection Kills Success

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While on holidays in early July, I watched our group of 3-5 year olds playing hide and seek. They were having a ball because each of them is learning to count so being the seeker was their chance to show everyone how high they could count, because the thrill of the chase is invigorating, and because the risk of getting caught (found) adds an element of excitement.

What I found consistent while watching these children play was how all of them, no matter how long the “seeker” counted, kept moving from one hiding spot to another. Yes, these are small kids, aged 3 to 5; yes, they are too young to grasp the strategic concept of the game; yes, they were actually hoping to get found. It appeared as though they would hide, then identify a spot that looked better, so they’d leave their first hiding spot to go to another. Once there, they’d realize that it either wasn’t as good as it looked, or that they see yet a better hiding spot elsewhere. And the cycle continued until the seeker was done counting.

The point is not meant to be critical because it applies to older kids who do understand the strategy of hiding stealthily so that the seeker can’t use his other senses to pick up a hint where the hiders might be. Either by making noise while hiding, or by wasting their precious lead time looking for the ideal place to hide, they often leave themselves vulnerable by trying to find the perfect hiding spot.

These children were exhibiting a behavior that we, as adults, emulate far too often. We regularly short-change ourselves by seeking perfection, or our personal idea of it; we jeopardize success in the now because we we see something that we “think” is better.

The young children playing hide and seek spent their entire hide time, while the seeker counted, their entire hide time was spent moving from spot to spot, often giving up a great hiding spot for a poorer one. The older kids playing hide and seek waste their hide time by trying to find that perfect spot that no one has thought of, and when they can’t find it by the time the seeker announces “Ready or not, here I come,” the hiders are usually not ready and end up settling for a terrible hiding spot just so that they actually hide and aren’t caught just standing there in the open…

How does this apply to you or your business?

  • How much time over the winter is spent researching the “perfect” seed variety to grow?
  • How much time is invested into monitoring equipment prices and inventories to feed the desire of owning a seed tool (sprayer/tractor/combine) which might be “that much better” than the one on farm now?
  • How much time is spent in frustration thumbing through all the resorts available to choose from in the Caribbean so that your winter vacation will be “perfect?”

Direct Questions

Is there more analysis put into short term decisions than long-term or even permanent decision?
(It took 3 months to decide what canola to seed…but we’ll just expand that bin yard over there!)

Is there more analysis put into what we find fun and less into what we don’t enjoy?
(I know precisely how many combines like mine are for sale in Manitoba right now, but I haven’t bothered to consider if I could reduce my interest rates.)

Have you passed by a really good hiding spot because you were trying to find the perfect one?

From the Home Quarter

“Paralysis by Analysis” is a not so old adage that I lean on regularly. It is a challenge for detail guys like me because we want to be sure we’ve got everything right and in place before we take the next step. “Paralysis” because sufferers never take the next step; they justify their inaction because the “analysis” isn’t complete. News Flash: it is never complete!

I have made great strides in shucking that condition. It pokes its head out occasionally…I treat it like “Whack-A-Mole!”

Your farm will succeed if your canola variety yields 3 bushels less, but stands better than the other variety you desired. Seeking a marginally better sprayer probably won’t make enough difference in your overall profitability to cover the added cost. And take the damn vacation…you deserve it, you’ve earned it! Stressing over picking the “right resort” kills part of the fun. It’s like trying to pick the juiciest apple on the tree by looking at them from the ground.

cash is not king

Cash Isn’t King

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I think this phrase has gained such popularity because of alliteration. The hard “c” in cash just rolls with the word “king.”

Let me emphatically disagree with the ideology that cash is king.

One could argue that the king rules all, answers to no one, and has absolute power. While I’m sure that is what the king would have everyone believe, the truth is that kings have always been influenced by the likes of his queen, his advisors, other diplomats, etc. Is he, then, truly the top, unflappable, incontestable?

Since we live in a democracy and are no longer ruled by a king or queen, when I hear such terms I think of cards. The card games I enjoy the most are 3-Spot (also known as Kaiser) and Poker. In both games, the king is soundly trounced by one card that is even greater.

Yes, I’m saying it.

Cash is not King.

It’s the ACE!

If cash is king, then that means that something else is the Ace, something else is more important than cash. This is simply not so.

Cash is the ace, the pinnacle, the life blood of your farm.

Imagine how the decisions would be different, the decisions that are made every day and every year on your farm, imagine how they would be different if you had an abundance of cash:

  • Instead of gambling on trying to time the commodity market high, you could sell your production whenever was most convenient and/or at an appropriate profit point.
  • You would cease the need for operating credit, vendor credit, or cash advances.
  • “Cash management” would no longer be juggling between various creditors and hoping you can deliver grain in time to make payments, but instead it would be paying bills on time (ahead of time?) and selling grain when it made the most sense.
  • Risk management programs would be a non-issue.
  • Equity loans to recapitalize the business would be a completely foreign concept.
  • Acquisition decisions (land, buildings, equipment) would be easier, faster, and more empowering.
  • YOU’D HAVE LESS STRESS!
    (That is capitalized for a reason.)

Cash is the Ace. It ranks above precision planting, Group 2 resistance, or the latest technology trends. The Ace outranks the King; it outranks all the other cards.

Direct Questions

Has cash always been your Ace, or have other things become more important?

What are the top three benefits to you and your business if cash was abundant?

How confident would you be to have TWO Aces in your hand?

From the Home Quarter

We often regard agriculture as doing amazing things with scare resources. Cash does not have to be one of those scarce resources even though that has been the mantra for generations (a.k.a Asset Rich – Cash Poor). Assets do not pay bills, cash does. The desire to convert cash into assets needs to be squelched at a time when debts are high, cash flow is tight, and profit margins are narrow.

Since cash is the life blood of your business, and a critical contributor to your financial health, when is the last time you had a checkup?

With your year-end financial statements now done, you’re ready for a checkup. Email your financial statements to me and I’ll provide you with a financial health report card. Normally a $500 value, this service is free if booked by June 13, 2016.

 

dichotomy

Dichotomy

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Here is a throwback to an article I wrote in August 2015 titled Is Data Management Really Important? where I highlighted a conversation between a friend and I that included his opinion that even large corporations let their “focus (be) primarily growth & profits and how to accomplish it, with information management being thrown together afterwards.”

While I believe that statement to still be true both for large corporations and farms alike, there is something in that statement that opens up what seems to have become the dichotomy of prairie grain farming: growth or status quo.

Let’s not get hung up on “growth’ as a single definition. In March 2015, my article Always Growing…Growing All Ways clearly described a few of the many ways we can achieve growth in our businesses that does not have to be pigeon-holed into the category of “expansion.”

So let’s clarify the dichotomy as “expansion or status quo.”

Now let’s compare a couple different scenarios.

  1. In the spring of 2016, I met with a young farmer who started out in 2000 with nothing but an ag degree and desire. As he prepared to sow his seventeenth crop this spring, he showed me his numbers while admitting that he felt good about his financial position, but didn’t really know if he was good or not. He lost almost 20% of his acres from the previous year, and was happy about it because the cost to farm that land was too high and he knew it.
    When I told him that I’d peg his operation in the top 10%, maybe even the top 5% of all grain farms on the prairies, he paused and said,”OK, so what are the top 5% doing that I’m not?”
  2. There is a farmer who has been calling me off and on for a couple years now. By all accounts, it is quite a feat that he is still operating. Although he’s been farming for well over 20 years his debts are maxed out, leases are burning up cash flow faster than the Fort McMurray wildfire is burning up bush land. He spends more time running equipment that his hired men; he has no clue what his costs are; he has aggressively built his way up to 10,000ac and wants to get to 20,000ac; one of his advisors told me that his management capability was maxed out at 4,000ac.

The first scenario has the farmer focused on growth of profitability, control, and efficiency.

The second scenario has the farmer focused on growth of the number of acres on which he produces.

One would be the envy of 95% of farmers.

The other will never in his entire career get to the point of financial success that the first farmer has already achieved.

Direct Questions

Which are you more like, the first farmer above, or the second farmer?

Which farmer do you want to be like?

What are you prepared to do to get there?

From the Home Quarter

What has been described above is actually a false dichotomy. We’ve been led to believe that farms must get larger in order to survive and that small farms were doomed. What that message failed to deliver was “At what point is a farm large enough?” I am not decrying large farms or the continued expansion of farms…as long as it makes financial sense! The false dichotomy of expansion or status quo need not be black or white, left or right, mutually exclusive. Farms that are not expanding today could be expanding next year, just like farms that are expanding today may not be next year. Some farms that have expanded over the last few years might even be looking at reducing acres in the future.

Growth (expansion) at all costs can often come with the heaviest of all costs.

trickledown effect of too much debt

The Trickle-Down Effect of Too Much Debt

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One would think we learned something from watching the US housing market collapse at the end of the previous decade. Yet, here we are, seven or so years later and many are making the same mistakes that were made by countless US homeowners.

Granted, the macro factors that helped to create the US housing crisis are not prevalent here in Canada. My favorite term from the US crisis was “NINJA” Mortgage: No Income? No Job? …APPROVED! Lending criteria in Canada isn’t quite that liberal.

What exacerbated the problem in the US was how homeowners were using their homes as a personal ABM, taking cash out whenever they wanted for whatever they wanted from the rapidly growing equity they had in their homes because the house values just kept increasing. They leveraged the “found” equity they had in their homes to feed their consumer appetite.

Here in Canada, and specifically farms on the Canadian Prairies, we’ve seen something similar. Rapidly appreciating farm land is being used to secure more borrowing, and often to secure the consolidation of other loans. The renaissance of farmland value appreciation, especially in Saskatchewan, added a dangerous amount of fuel to a fire of pent up demand. Land “equity” was used for the feverish acquisition of equipment, buildings, and more land.

In the US, while sub-prime mortgages kept payments low, everyone was happy to be ticking along with borrowing and spending to their heart’s content…until the sub-prime period ended and the piper needed to be paid. With a property fully leveraged and no ability to repay the debt, many homeowners resigned themselves to foreclosure. Those who may have had an ability to pay the debt saw the value of their fully leveraged property start to decline because of all the other foreclosures, so when they found themselves underwater, they too went the route of foreclosure.

No one is arguing that things are different here. True. Borrowing criteria is more stringent in Canada. What is similar, however, is the experience of a rapid appreciation in the value of real estate and the leverage of said appreciation to support more (other) debt.

I was talking with a 17,000ac farmer recently who was very aggressive in expansion over the last several years. He has increased the size and scale of his farm in every way: land, equipment, labor, and debt. He made no bones about continuing to leverage all assets, including the appreciating land and his depreciating equipment, to the fullest extent in an effort to facilitate further expansion. The scourge of his actions over these last few years was the incredible drain on his cash flow to service all this debt. This came to light for him when recently he needed land equity to source an operating line of credit so that he could meet his debt payments.

Direct Questions

Have most of the increases to equity on your balance sheet come from appreciation of asset values or have they come from building your retained earnings?

How has your Debt to Net Worth changed over the last few years?

Are you drawing on your operating line of credit to make loan payments?

From the Home Quarter

It amazes me how what was ingrained into our long term memory for so long was so quickly forgotten. The memories of the indescribable hardships of the 1980s and 1990s have seemingly been overtaken by the boom years of 2007-2013. The willingness to replace the history lessons of tight margins and poor cash flow with the euphoria of big profits and cash to burn has led to many farms now facing a debt and cash crisis similar to what was common in the final 20 years of the last century.

The trickle-down effect of debt stems from when debt levels increase as fast as, or faster than, the borrower’s long term cash flow and net income. While asset levels increase, sometimes very rapidly, tremendous growth in debt levels eat away at potential equity and use up available cash flow. While the land base has expanded and late model equipment efficiently farms all the acres, while the bins may be full and the employees are busy, it all trickles down to cash.

When the demands on your cash are a raging river, it is pretty hard to live on a trickle.

 

 

Spending Less

Spending less is more valuable than earning more….

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Let’s start with a handful of truths:

  1. You need to spend more to earn more, but it is incremental such as…
    • When you go beyond the exponential benefit (spending $1 extra to earn $2 more,)
    • When you move into the realm of linear benefit (Earning $1 for each $1 you spend,)
    • When you push on and find yourself in a negative benefit (each $1 spent earns less than $1 return)……we may have reached the beginning of the end.
  1. Earning more leads to spending more.
  2. In what is our “consumer society,” we are driven to spend more.

 

Ok, so let’s expand a bit for some clarity.

Spending more to earn more applies to your crop inputs.
Does investing in a $200/ac fertility plan earn you more than $200/ac above what you’d earn without any fertilizer? Of course it does. How much more…have you figured it out?
If spending $20/ac on fungicide can earn an extra $60/ac in revenue, it’s a no brainer. Can it? If you expect to yield 40bu/ac on a wheat crop, will that $20 fungicide earn you a $1.50/bu premium? What’s the spread between #2 and Feed? If it is $1.50/bu or less, why invest in the fungicide?

When we earn more, we spend more. It’s just the way it is. Does it have to be this way? No, of course not, but in our consumer society where we need instant gratification, usually achieved with retail therapy, our consumerism appetite is nearly insatiable. We’re all guilty of this to some extent…even me.

The title, “Spending less is more valuable that earning more” is a line I read in an Op/Ed piece and that line is attributed to Andrew Tobias from his book The Only Investment Guide You’ll Ever Need. I have not read Tobias’ book, so I cannot offer anything on his intention or his message. What I can do is share some of my perspectives on the realities of how we spend.

  • “I just got a raise, so let’s go out for supper. I’ve never had escargot before, but hey, I’m earning more now, so why not?”
  • “We just closed that deal and it will put me over the top for the bonus I’ve been waiting on. I’ve had my eye on that Ferrari for so long…paying off my line of credit can wait until next bonus!”
  • “Wow, we’ve had a banner year! We’ve never seen this kind of cash flow before! Interest rates are so low. I bet I could get a deal on a new <shop/tractor/combine/etc.>

From my days at the bank, I saw a client pay approximately 10-15% more than market price for land, and then 1 year later, pledge to buy a brand new combine with cash. At the time, their working capital was adequate, not especially strong, but it was adequate. They were prepared to use up all of their working capital to buy this new combine because they had a strong year (and felt that many strong years were to come.) I gave them good advice: do not use up your cash to acquire a depreciating capital asset. As a thankyou, they didn’t even give me the loan (they went to another lender.) The very next year, they got hammered with excess moisture and were a breath away from getting all their loans called. Imagine if they hadn’t taken good advice!

Early in my banking career, I heard a grizzled old banker say “Farmers hate having money in the bank; as soon as it’s there, they spend it!” Recently, I listened to a very progressive farmer admit to keeping a set balance in his operating account by shifting excess cash out to a savings account. His rationale: if I don’t see it I won’t spend it; I know it’s in another account, but I don’t track it like my operating account so it’s not available to spend on something I really didn’t need!”

Beautiful!

In our chase to “earn more” we can easily get caught in a cycle of working harder & longer, and investing (spending) more in our business in an effort to boost revenues. Yet the tradeoff of return versus investment must be considered. Investment isn’t just monetary.

Just the other day, I was talking with a client who is considering adding an enterprise to his farm. (For the sake of confidentiality, I won’t give more detail than that.) This new enterprise would very likely bring significant positive cash flow to his farm and family, with very manageable new debt required for equipment to perform the work. He is a strong relationship marketer from previous work outside of farming, so “business development” isn’t a risk for him. The question I asked, the question he couldn’t yet answer, was, “How much time are you prepared to take from your farm and your family for this venture?” His investment wildcard is “time.”

Direct Questions

We’ve discussed ROA and ROI in the past. How are you implementing a reasonable “return” for your investment in inputs, assets, and time?

How would you feel to have 1/10th of your net worth sitting in the bank as cash? That’s $1million in cash on a $10million net worth. Would that burn a hole in your pocket, or give you a calm and serene sense of security?

Where is your mindset when it comes to generating profit: is it from increasing revenue or decreasing expenses…or both?

From the Home Quarter

Andrew Tobias has received many accolades for his writing, and he was the one who wrote “Spending less is more valuable than earning more.” If that applies in a practical sense or not, we could argue all day by bringing up economies of scale, leverage, and tax rates. I am contending that it applies to a mindset of earning a profit and hanging on to it, building those retained earnings, establishing that “war chest,” and setting yourself and your business up for riding out the rough spots in the economic cycles.

Taking all your profit from the last go-round and reinvesting it all on the next one has a place.

It’s called a casino.