There’s no doubt small business owners could a thing or two from billionaire Warren Buffett. He’s one of the wealthiest investors and business owners in the world today, but he wasn’t born that way. He started small just like every other business owner, and has made plenty of mistakes along the way. Lucky for us he’s given us hundreds of pieces of wisdom to help us become smarter investors, and better businessmen.
Here are 4 critical lessons small business owners can learn from Buffett:
1. You can always succeed at a turnaround…always!
Want to know which investment Buffett calls his absolute worst? Ironically he’s awarded this unlikely winner to Berkshire Hathaway, the company he runs today with a market cap of $314 billion!
When Buffett first acquired Berkshire it was a fledgling textile company that he thought could be turned around into a thriving business. Turns out he was wrong. The textile industry was fledgling, and it was taking Berkshire down with it, so Buffett went back to the drawing board. He decided to take Berkshire out of the textile industry, and into what Buffett knows best; the financial services industry.
Imagine that, Buffett turned around what he labels his “worst investment” into the one that later turned him into billionaire.
The small business environment is constantly changing. In order to survive you must adapt to the current conditions, and you can always success at a turnaround…always!
3. Always know your numbers
Accounting is never the most exciting part of running a small business, especially when your focus is dedicated to the numerous day-to-day priorities of running the business, but knowing your numbers is critically important.
Buffett has always said that “accounting is the language of business.” If you’re not able to adequately speak the language then your outlook for growth, let alone sustainability is slim. By thoroughly knowing the numbers of Berkshire Hathaway, Buffett’s been able to keep the company’s financials strong, even in times of recession.
3. Understand your business to the core
In order to operate, and successfully grow a business you must understand it to the core. This includes all aspects of the business from it’s customers, products, competitors, and surrounding economic environment.
Buffett always advises to “never invest in a business you can’t understand.” The same principle is absolutely true for running a business. A business should never be operated in an industry in which the partners don’t thoroughly understand.
Oftentimes this comes in the form of years of experience. The reason Berkshire Hathaway is as successful as it is today is because Buffett has over 6 decades of experience in the financial service industry. That’s more years than many small business owners have even been alive!
If the owner of the business doesn’t have this level of understanding or experience, it’s critical to hire a management team that does.
Speaking of management teams…
4. Your business partners will either make or break you
Buffett has alway been a big advocate of business owners surrounding themselves with people smarter than they are. This provides the owner an opportunity to gain mentors, and also help the business grow. At the end of the day, competent management teams are the lifeblood of all successful companies.
Buffett has always lived by this mindset. In 1949 after graduating from Columbia his goal was to become a stockbroker, so he sought out the most successful investor of his time, Benjamin Graham, and offered to work for him for free. Buffett was willing to trade any income he would have earned for the opportunity to learn from the best. He knew in the long run it would pay huge dividends, and it did.
So, to what lengths are you seeking smarter people than yourself to help grow your business and learn from?