Last week we posted several quotes by Warren Buffett on running a business and finding success. Like just about everyone else, we’re impressed by Mr. Buffett’s ability to start several businesses, then grow one of them—Berkshire Hathaway into an amazingly profitable giant. And from the exotic locale of Omaha, Nebraska, no less.
So we wanted to take a deeper look at a few of the things Mr. Buffett did when he was first starting in business. The lessons we take from his life might benefit you, if you’re trying to start a new business. Check them out:
1. Don’t be too eager to pull profit out of your business.
Too often, a small business owner starts to make a little money and they can think of a bunch of things they can spend it on to make life a little better. But that’s not the Buffett Way. In high school, Warren and a friend pooled their money and bought a pinball machine to put in a local barbershop. As the machine made money, they reinvested the earnings into buying additional pinball machines, until they had machines in barbershops around the city. And when they eventually sold the business, Warren used the proceeds to buy stocks and start his next business. The lesson for small business owners? Reinvest your profits to grow and strengthen your business.
2. Frugality can be your best friend.
Even as late as 1989, Warren Buffett’s billion dollar company was managed with just 11 employees in an office not much bigger than a tennis court. In Omaha Nebraska. He could have afforded a more opulent office. He could have afforded an office on Wall Street. But that’s not the Buffett Way either. Warren is frugal. He is interested in maximizing value. He once bought a company whose owner counted the number of sheets in a roll of toilet paper to make sure he wasn’t being ripped off. The lesson for small business owners? Taking care when it comes to spending goes a long way toward maximizing your profits.
3. Stick to what you know.
Warren Buffett is famous for saying he won’t be a stock or company that he doesn’t understand. It’s just too risky. He has had hundreds of opportunities to invest in great opportunities (many which in fact were great) but he passed. In addition, Mr. Buffett prefers businesses with a long-term advantage. He has said, “The most important thing to me is figuring our how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles.” The lesson for small business owners? Run a business that you understand. Don’t chase new fads just because everyone else is doing it. And build a business that is defensible for the long-term.
4. Make a difference.
Warren Buffett is famous for making a lot of money—for himself and others. But that’s not what defines him. He’s pledged to give away his entire fortune before he dies. He takes a personal interest in the people around him. He once said, “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.” Lesson for small business owners: This one is pretty easy. Don’t be a jerk. Take care of the people around you. And use your success to help others.