Most of the time when you read about Warren Buffett it has to do with what an amazing investor he is and how you can invest like him. Do you want to learn how to make 1000 a week? Want to earn $100,000 a year? There’s a lot to learn if you’re just starting out, yet many of his pieces of advice can be directly tied to being successful running a business as well.
After all his wealth was created by purchasing good businesses and holding on to them!
I want to share with you three things that are talked about when investing the Warren way and convert them to business advice (although this is not a stretch as you will see!)
One thing that Buffett has talked about many times is that your success is tied to taking action. In fact he has a great quote about this “It does take a temperament that’s willing to step up and actually act.”
Just as in investing you can research and plan all you want, but until you actually take some action it just does not matter. If I pick winning stocks all the time, but never actually buy the stock then I did not win. Likewise if you have a great idea for a business or new product, but never actually act then you will not win.
Stop obsessing about the plan and start taking action! (click to tweet!)
Buffett consistently, along with many other great investors, talks about making investments in what you know and understand. There is no point in buying into something for the long run if you do not understand the basics of the business.
When running your own business you can look at this two ways. First, if you are already in business are you actually working on what you are good at? It may be time to delegate out what you are not good and don’t understand. Focus on your strengths and outsource the rest.
Second, if you are just starting up a business focus on creating a business around something that you know and can do successfully. If you don’t know how to play the piano you should not start offering piano lessons! It will be much harder to start and run a successful business if you must first learn what you will be selling!
One of the corner stones of Buffett’s investing is that he looks at his version of free cash flow. Free cash flow is what is how much cash is left after capital expenditures, meaning this is what the company has to grow revenues, add products or pay dividends. The more cash the better the company is able to add more value and pay the owner of the company any dividends.
When running your business you need to remember that cash is king! Many business will go out of business, even when they are doing good, if there is not cash left at the end of the day to pay bills and grow. Not to mention to make sure you have money to put aside for your retirement! Don’t solely focus on revenues, ensure that you have cash coming in and available when you need it!
Now I challenge you, to start acting on one of the second two tips today! Remember action is required to be successful, so act on either focusing on your strengths or increasing your cash flow!