10 Business Lessons from Warren Buffett: Practical Steps From the Investment Guru
Warren Buffett is an 84 year old American Business Magnate, investor and philanthropist. He is one of the richest persons on earth with an estimated wealth of $74.4 billion as at 9th December 2014.
I will be sharing some business lessons entrepreneurs can learn from this great investment tycoon.
Business Lessons from Warren Buffett
1. You Should Start your Own Business Now
Do not wait for the best time to start your own business. The perfect time to start is now. Warren started selling gums, Coca-Cola and weekly news papers as a child. He also started investing in stock market at age 11 after visiting the New York Stock exchange at age 10. You easily get rich in business if you know when you are wrong. Warren started his Hedge Fund at age 17. It is good you start early, make all the mistakes early and correct yourself early. Tomorrow is not the best time, NOW is.
2. Thrive to be Different
Always try out your own method/idea of doing things. Do not always imitate others. Do not make business decisions based on what every other person is saying or doing. When Warren Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he’d fail, but when he closed his partnership 14 years later, it was worth more than $100 million.
3. Reinvest Your Profits
For your business to grow, you need to continually reinvest your profits. Most entrepreneurs are always tempted to spend their first business profits. This is not a good idea if you wish to grow better than you where. Warren knew about this early enough. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the venture was sold, Warren Buffett used the proceeds to buy stocks and to start another small business.
4. Integrity Matters
Whatever decision one take in business has its implications. If you sell bad ideas to make gains, you lose friends and future business contacts. For one to be very successful in business, one must consider what happens after today (sealing business/transaction). Be sincere in all your business dealings. Integrity gives you and your business good name.
5. Be Swift in Taking Business Decisions
Though it is advised you get enough information about any business you wish to venture into, you have to be swift in taking decisions. Warren Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb sucking.” When people offer him a business or an investment, he says, “I won’t talk unless they bring me a price.” He gives them an answer on the spot.
6. Know the Terms of the Business
Understand the conditions attached to any business before venturing into it. If you are doing a work, know your pay; if you are combining to startup a business, know your ownership percentage/shareholding. Warren Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Warren Buffett was horrified that he performed such backbreaking work only to earn pennies an hour. Always nail down the specifics of a deal in advance — even with your friends and relatives.
7. Don’t Always Borrow
You can never be very rich when you continually work or run your business on credit. It is like working for your creditors. Limit your borrowing, by re-investing your profit and reducing the amount you borrow. Warren Buffett has never borrowed a significant amount — not to invest, not for a mortgage. He has gotten many heart-rendering letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can use to invest.
8. Be Persistent
Be determined to achieve your defined goal. Do not allow the success of your competitors deter you own startup. If you are diligent and committed, you will become a strong competitor in no time. Warren Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. To Warren Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.
9. Do Not Overlook Small Expenses
Some entrepreneurs will label this as being stingy with oneself but Warren Buffet admires friends that does everything within their means to check extra expenses. Buffett love investing in businesses run by managers who are obsessed over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only one side of his office building that faced the road. Checking unnecessary expense can make your profits and paycheck go much further.
10. Be Definite about what success is
You should understand what success is and know when you have attained success. Success to some entrepreneurs can mean reaching a target or making a certain amount of profit in a giving period but to Warren Buffet, it is not so. Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself — no Warren Buffett buildings or halls. “I know people who have a lot of money,” he says, “and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you’ll measure your success in life by how many of the people you want to have loved you, actually do love you. That’s the ultimate test of how you’ve lived your life.”