It’s often been said that the only difference between wealthy/successful people and not so successful/poor people is how they think.
I have always followed Henry Ford’s advice.
He was one of America’s most successful entrepreneurs.
So if one wants to be successful, simply copy a successful person’s thinking.
Henry Ford was prepared to “give his cars away for free as long as he retained the spare parts.”
He also famously stated “You can have any colour you want, as long as it’s Black”
He certainly thought differently to everyone else and it was with that mindset, he had built a massive empire.
He focused on investing into his Balance Sheet whilst the rest of the competition focused on their P&L.
The “car” he refers to in our industry is the “Trust/Company” setups and the “spare parts” he refers to is the “compliance” work.
The compliance work is the “annuity” income.
However to get the annuity income one must “invest” (Balance Sheet) in their business.
Our “investment” is selling structures such as Trusts and Companies at a “competitive price” which than produces compliance work which is an annuity income for life.
His comment regarding “…any color as long as it’s black” refers to ‘specialising in one thing’ as he ushered in a new era for industry and manufacturing with mega factories and assembly lines and laser focus on highly efficient processes for optimal production output.
In other words, don’t spread yourself too thin and focus on doing a few things really well.
It reflects an ethos of doing one thing a thousand times as opposed to doing a thousand things, once.
There is more success in “sticking to one’s knitting” and getting really good at it than being a jack of all trades and a master of none.
As an example,
I had a friend who manufactured “nail guns” and the nails that went into the “nail gun”.
When he first came into the market there was an existing competitor who sold his “guns” at a high price.
My friend came into the market and sold his “nail guns” at cost.
It was really tough for the first 5 years as he made no money on his “nail guns” but he was investing into his Balance Sheet.
He soon captured the market because thousands of customers bought his “guns” as it was cheaper. He was investing.
As a result of that balance sheet investment, he made a lot of money selling the nails (P&L) to his “guns”.
Today he is extremely profitable due to the nails that are being sold for the thousands of “guns” in the market place.
The investment in putting thousands of “guns” in the market meant that they all had to buy the nails from him and he created a passive income.
The competitor eventually went out of business due to their persistent high pricing of their “nail guns” and lost customers as result.
Why didn’t his competitor change ways?
It’s the same reason why the frog died in boiling water – because the water gradually became hotter and he did not notice it until it was too late.
Many businesses die this way if they don’t adapt and evolve with the times.
Which is why we have to embrace technology, outsourcing and be more efficient at what we do if we are to survive and thrive.
The competitor’s focus was only on the P&L and not the Balance Sheet.
The money is in the nails/spare parts/compliance.
Invest in the Balance Sheet by “selling at a competitive price” the Trusts/Cars/nail gun to achieve a trailing/annuity income from the compliance/nails/spare parts.
Hope that helps to shape your thinking because your thinking determines your actions and your actions shapes your life/success.
Ed Chan is the Co-Founder & Non-Executive Chairman of Chan & Naylor Accountants. He is a co-author to a number of best selling books including ‘Small to GREAT: how to to turn your small business into a great business’ outlining the principles and systems he and the directors of Chan & Naylor implemented to turn a suburban firm into a national group recognised as the fastest growing firm in Australia, by Business Review Weekly (2007, 2008 and 2013).
Ed offers a Leadership Program to Accounting firms for Improved Results. He assists firms to achieve better profits and work life balance using the same systems and processes that have taken Chan & Naylor nationally.
Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.