FOWLER: Two balance sheets to measure financial success | Local News


“So they got more money, but you can get more money out of a savings account if you keep adding to it every year… (comparing an ‘asset-rich’ business to a ‘thin’ business in assets”). One is a wonderful, absolutely sensational business, the other is a terrible business. –Warren Buffett

When I talk to leaders about measuring financial success, I always steer them away from their income statement and balance sheet. Why? Because it’s not what you do, but what you keep that counts.

For example, if you are in an “asset-rich” industry, you probably spend a lot of money each year upgrading or replacing assets. Because these are capital purchases, they won’t show up on your income statement, but they do take money or borrowing capacity out of your business. These purchases suck up your capital and ROI. Asset-light companies do not suffer from the same problem.

So if you have the choice between investing in an “asset-heavy” business or an “asset-light” business with similar bottom lines, choose the asset-light business. The return on investment will be much higher.

Now, let’s turn that theory against us. Do we live “asset-heavy” or “asset-light” lives? We can make a ton of money (income statement) in any given year and consume it all. Our balance sheet won’t be any better and the things we bought are probably depreciating quickly or weren’t an asset at all.

Our income statements are fine but our balance sheet is not better.

What if we had a great year of earnings and decided, instead of consuming all that money, to pay down debt or invest in an index fund for the future? Our balance sheet would improve, as would our income statement.

This is how you succeed financially on this earth.

But what if you want to be financially successful for eternity?

The same principles apply. You want to earn as much as possible by providing as much value as possible with your time. But if we lead an “asset-free” life, we can invest that money in things that improve our bottom line here and for eternity.

“Do not lay up treasures on earth, where moths and vermin destroy, and where thieves enter and steal. But lay up treasures in heaven, where moths and vermin do not destroy, and where thieves do not enter and steal. For where your treasure is, there your heart will be also. – Matthew 6:19-21 (NIV) – Jesus speaks

If we can convince ourselves to live “assetless” lives, we can invest more forever. When we do this, our hearts automatically become more focused on heavenly things than on worldly things.

Rick Warren gave a great example. When we give to kingdom building activities, more people end up in heaven (for eternity). When we get there or when they get there (depending on who gets there first), there will be this group of people lined up to tell you how this gift you gave (financially or in time) played a role in bringing them to the sky (for eternity).

It’s a big problem. Good money management requires us to build a good balance sheet on earth, but I hope I can spend more of what I earn to build a great balance sheet in heaven!

Curt Fowler is Chairman of Fowler & Company and Director of Fowler, Holley, Rambo & Stalvey. He is dedicated to helping leaders build great organizations and improve their lives and the lives of the people they lead.

Curt and the team at FHRS help leaders build great businesses through fractional CFO, strategy, tax, and accounting services.


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