BNET | John Warrillow
In his 2011 annual letter to shareholders, Warren Buffett offered a variety of insights for business owners. Here are five of my favorite pearls of wisdom from the Oracle of Omaha:
1. Don’t throw the baby out with the bath water
Berkshire Hathaway has a significant exposure to the U.S. housing market, yet instead of selling assets or de-prioritizing the industry, Buffett made some additional investments in his housing-related businesses, including purchases of the largest brick manufacturer in Alabama, a new $55-million plant for roofer Johns Manville and five “bolt-on” acquisitions for MiTek.
Takeaway for business owners: Don’t mistake an industry in a cyclical downturn for a business in trouble.
2. Keep your “elephant gun” loaded
“Our elephant gun has been reloaded, and my trigger finger is itchy,” writes Buffett.
Berkshire Hathaway is sitting on $38 billion in cash, which means it has the resources to buy when others are keen to sell. For example, Buffett deployed $15.6 billion in the 25 days of chaos that followed the Lehman bankruptcy of 2008. Although markets have stabilized, he is still on the hunt for opportunities.
Takeaway for business owners: Build up a war chest of cash — maybe one or two months’ revenue — to pounce on opportunities when others are playing defense.