Warren Buffett is one of the worlds most famous and successful investors, but he is a successful businessman as well. In fact, he advises any stock owners to treat their own stock as if its a business. With that being said, Buffett offers up some of his famously-simplistic advice in regards to running a business. Here are eight of Warren Buffett’s rules for a successful business!
1) Low Costs
“Low costs permit low prices, and low prices attract and retain good policyholders,” Buffett says. In his 1996 letter to shareholders, Buffett credited the success of its insurance subsidiary, GEICO, solely to its low-cost operation.
2) Keep It Small
Expanding on the thought of keeping costs low, Buffett also advises that people keep their businesses a little on the small side. In his 2006 shareholder letter, he wrote that he was wary about “the ability of big entities of any type to function well… size seems to make many organizations slow-thinking and resistant to change.”
It isn’t a huge surprise to hear this, as Berkshire Hathaway’s corporate headquarters only employs a handful of people. Using this tactic, Buffett thinks his employees act like managers and his managers think like owners.
3) Stay Out of Trouble
This is pretty self-explanatory: Don’t dig yourself a hole. Also, Buffett always thinks you should think ahead.
“It’s much easier to stay out of trouble now than to get out of trouble later,” he often says.
4) Keep Your Focus
In his 1979 letter to shareholders, Warren Buffett warns his colleagues that boredom or over-confidence could lead to management boredom, and if leadership was distracted it could “neglect its wonderful base business while purchasing other business that are so-so or worse.”
He goes on to explain that one cannot get so caught up in the chase that they forget the consequences of the catch— some sound advice for many different aspects of life. Simplistically, though, Buffett is advising everyone to keep their focus and not lose track of their business goals.
5) Treat People Well
This is arguably the simplest and most important rule for a successful business. Treating people good is good for business. Buffett wants his employees to think of Berkshire as a family operation, and businesses are more likely to sell to him (maybe even for less) if they trust you.
6) Keep Good Company
“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,” Buffett says.
In one of my favorite Warren Buffett quotes, he shares some extremely simple advice on how to better yourself and your business. Obviously, you don’t want to hire people who have poor behavior, but it’s a good idea to try to find people who have a better performance than you— though maybe not always possible!
7) Guard Your Reputation
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
“Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless,” Buffett told a congressional panel in 1991.
Clearly, Warren Buffett takes the reputation of Berkshire Hathaway very seriously— making it hard to chose just one quote. Businesses will always be more resilient in the face of adversity, and more successful overall, if they are conscious about their reputation.
8) Keep Some Things to Yourself
“A little greed is good,” Buffett says. Not only does Buffett think that you are your biggest investment of all time, he also thinks that you should make a habit of putting yourself first. If you know about an undervalued stock, keep it to yourself— it’s okay to let your business benefit and put your own success first.