24/7 Wall St. Insights

• Warren Buffett is famously known as the “Oracle of Omaha.”
• His investment wisdom is legendary.
• Has a great dedication to philanthropy.
• Also: 2 Dividend Legends To Hold Forever   

American businessman, investor, and philanthropist, Warren Buffett, is considered one of the most revered investors of all time. With his common-sense approach to investing, he has amassed a net worth of $138 billion dollars. He is known for building up Berkshire Hathaway, a struggling textile company in 1965 to the profitable powerhouse it is today. So when it comes to building and scaling a business, potential and current business owners would do well to take notes on how this “Oracle of Omaha” conducts his business and investing affairs. Here are 10 Warren Buffett Quotes on Business that everyone should hear. 

Why Are We Covering This?

With his extraordinary success as a business leader and investor, Buffett has certainly earned his stripes to impart his hard-won wisdom to the business and investment community.  The key to his success is his ability to focus on the long-term strategies when it comes to business operations and choosing the right investment opportunities. For Buffett, it’s about choosing organizations that have robust fundamentals that will inherently produce long-term results and scalability. If you would like glean more “folksy wisdom” from Warren Buffet, especially for 20 year olds starting off on their career and investment journey, check out this article. 

1. “The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.”

• Protect your capital.
• Avoid losses in favor of pursuing high returns.

Adopt a Long-Term Perspective

When it comes to keeping a business afloat, capital is of the utmost importance. Therefore, to guard this precious resource is paramount. Experiencing considerable losses will only slow down a business’s progress, as it would need to work harder to recover from that loss, if it recovers at all. Buffett emphasizes on the need to research your investment opportunities thoroughly in order to minimize the risk of losing money. 

2. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”

• Strike while the iron is hot.
• Maximize gains.

When It Rains Gold…

According to Buffett, when stocks are at a significantly low price, this is the time to not only invest, but to invest aggressively. These are rare opportunities where having some extra capital set aside for investments would enable business owners to decisively take action and fully capitalize on them. This is not the time to be overly cautious as taking full advantage of these opportunities could maximize gains. 

3. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

• Be mindful of your actions.
• Always act with integrity and caution.

A Good Reputation is Fragile

When it comes to business in an era of social media, transparency matters. Businesses who conduct their daily operations without integrity will eventually be exposed, permanently damaging the reputation of the company. It is critical that the leadership uphold ethical standards and to expect the same from their employees. Any shortcuts or unethical actions will compromise the company’s values. The first step that companies can take to uphold ethical standards is to deliver on their promises. Either meet or exceed expectations on commitments. This will build trust and create a solid reputation. 

4. “We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity.”

• Hire self-starters.
• Hire those who are smart and energetic.
• Hire those who have integrity.

Employees Must Be Trustworthy and Dependable

In order for your business to have success and sustainable growth, the leadership must construct a detailed job description, detailing these attributes as a must before potential candidates can be considered for a position. When expectations are set high, those candidates who are not aligned with these values will be less likely to apply. Ask candidates specific questions that explore how they’ve handled certain real-life challenges and situations in the past. This helps you gauge their problem-solving skills, work ethic, and experience.

5. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

• The company must have robust fundamentals.
• It must also have excellent management and a competitive advantage.

Don’t Focus On Buying The Cheapest Companies

When it comes to investing, Buffett is suggesting to look at the quality of the actual company, rather than the bargain-bottom price the stock is being sold for. Although you will not be paying a low price for a high-quality company, this type of company is more likely to yield higher returns for a longer period of time, due to its robust business operations, ethics, and management. The fundamental value of the company is more likely to have a solid business model, consistent profitability, and growth potential. A fair company may be missing these attributes, ultimately impeding future growth and profitability. 

6. It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”

• Associate with people who are ethical.
• Associate with people who are successful.

People Are Influenced By Those Around Them

When it comes to common-sense wisdom, Buffett delivers. The key to success is not only about hard work, intelligence, and tenacity, among other factors. The people you surround yourself with can deeply impact your success in life and in business. That is why it is wise to select your business associates carefully. Mindset plays heavily in the way we weather the storms of running a business. If you are surrounded by naysayers, this will ultimately affect your mindset, keeping you from staying the course and find the solution to your current business challenge. 

7. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” 

• Concentrate on doing a few things well.
• Prioritize smart choices while avoiding major pitfalls.

Focus on Quality, Not Quantity

For Buffett, it’s about taking action on the things that will move the needle forward towards your long-term goals for your business and investments. Since it is impossible to excel in everything, the key is to focus on your strengths and your competitive advantage and do this well, as this will move you in the right direction of progress. Furthermore, hone in on key areas, making it your goal to learn and improve on everything there is to learn on a skill, industry, or business model. 

8. “In the business world, the rearview mirror is always clearer than the windshield.”

• Easier to see what happened after event has unfolded.
• The windshield represents the future which is largely unknown.

Sound Decisions Require Clarity, Not Ambiguity

It is only natural to want to avoid potential pitfalls, but in business, they’re rarely obvious, especially at the start of your journey. Unfortunately for most who prefer to be in control of every aspect of business, the reality is that valuable insights will only be gained after an event has occurred, rather than before. When it comes to a business launching a new product, all the necessary research and testing can take place before launch, however, the real proof of success will be determined when consumers try it out for themselves. Here is where you will get instant and insightful feedback to course correct and improve. 

9. “Your premium brand had better be delivering something special, or it’s not going to get the business.”

• The brand must offer something unique
• They must offer exceptional service. 

What Is Your Value Proposition?

Premium brands are perceived to be products that are higher in value, exclusivity, and quality compared to lower budget products. As such, these products typically charge higher prices. Buffett advises that if businesses offer a premium brand, they must possess a superior level of service, experience, and innovation in order to justify the higher prices. What’s more, consumers are more than likely to expect this as well. Although consumers are willing to pay more for quality, they certainly would like to receive the premium value in exchange. In order to maintain customer loyalty and retention, businesses must continuously deliver on their promises or risk losing their market share to competitors.

10. “We enjoy the process far more than the proceeds.”

• Enjoy the day-to-day business activities.
• Have a passion for learning and growing.

Love What You Do

Let’s face it, launching and running a business is not for the faint-hearted. It is a constant roller-coaster of emotions. It is a challenge to gain and maintain capital and there are a plethora of challenges that will require creative and strategic methods to solve. Rather than just focusing on the financial satisfaction that comes from running your own business, the truth is that reaching this goal (profitability) will be a challenge in itself. That’s why Buffett emphasizes the need to find fulfillment and satisfaction with both the learning process and the work itself. 

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