With a wealth exceeding 50 billion dollars, Warren Buffett is one of the wealthiest people in the world. But how did he build this wealth? This is a question that many entrepreneurs have asked themselves. If you want to build a successful business, learning from those who have greatly succeeded can be extremely beneficial. You will be able to dive into their mindset and see how they structured their enterprise for maximum profit and efficiency. Due to his financial success and the number of industries he invested in (textiles, insurance, energy, financial services, retail, etc.), Warren Buffett is a man that is admired by businesspeople from around the globe. Here are some business lessons we can learn from him:
Have a Deep Understanding of Your Business
Warren Buffett once said “Never invest in a business you can't understand.” This could be some very wise advice for beginning entrepreneurs. Many people have tried to start a business, but ended up failing within the first year, not because of lack of motivation or skill, but rather, because they didn't have a sufficient understanding of the type of business they were going to run.
Don't jump into a business opportunity just because the promotional materials “look good” and promise you big dollar figures. Do the proper research on how that industry and the specific type of business you will be starting will work.
In the late 1990s, the dot-com boom started, with many entrepreneurs starting web-based businesses. However, Buffett stayed out of that one, simply because he didn't have a sufficient understanding of how technology businesses operate.
Choose Your Partners and Associates Carefully
Another mistake that some people make is partnering up with the wrong type of people when they start a new business. It is common for younger entrepreneurs to try and start a business with friends. Sure, some people may make great friends, but this doesn't mean they would be a suitable business partner.
Entering a business partnership is a serious matter and if conflicts arise between the partners, this could ruin a perfectly good business idea. Buffett recommends choosing people that you have known for a long time, who have a very positive attitude and above all, who can bring something to the business that you don't have. For example, one of your partners could be very strong in accounting, or advertising, while you may have strengths in different areas.
Focus on Long Term Prosperity
If you want a business to thrive, you will have to think in the long term. This is something that Warren Buffett figured out early on, and is the main reason why he doesn't invest in businesses that don't have a very solid plan for long term success.
Of course, the goal of business is to make profit. But a good entrepreneur shouldn't be overly concerned with making large short term gains. Rather, they would want to build something that can keep thriving for decades. Adopting a “long term” mindset means that you build positive relationships with your management team, employees and customers, plus invest your profits back into your business so that it can keep operating smoothly and grow in the long run. Also, avoid business types that are centered solely around a “fad” product that could be widely popular now, but that could lose its appeal to consumers within a few years, or even months.
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