Berkshire Hathaway is regarded as one of the most successful companies in the world run by chairman and CEO Warren Buffett, who has been a source of inspiration for entrepreneurs and venture capitalists everywhere. We picked out a few lessons any start-up can glean from Buffett to succeed in their business.
Key learnings from Berkshire Hathaway
Be Honest About Your Business’s Worth with Investors
It is extremely important for a start-up to be honest about the value of their company. Berkshire Hathaway has always maintained that with its investors, no matter how much the value of the companies has increased or decreased. For instance, if you have a start-up that’s worth $2 million dollars, but you find an investor who is willing to invest at a $10 million valuation. That may sound great in the short term. But when the time comes to raise the next round of capital or to evaluate the company’s financials, there won’t be any financial metrics that support that valuation. It may be very difficult to raise the next round of capital.
Assess Risk Involved, Research
Start-ups must think about the worst and best possible scenarios and promptly make the most rational, progressive decision. Buffett prides himself in making swift, well-informed decisions and acting on them just as fast. He deems any unnecessary dilly-dallying as ‘thumb sucking’. “Do your research thoroughly, well in advance. Gather all the necessary information and act decisively. Say no if you have to,” he wrote in his book ‘The Snowball’.
A Trusted Team, Don’t Micromanage
Oftentimes small businesses, particularly start-ups, make decisions based on emotion. Having a central group of trusted confidants can help smooth the decision-making process for owners. For the most part Buffett allows people in charge of the business to keep doing what they were when he bought it. At a certain point, the same rule is going to apply to a start-up as you can’t manage every tiny detail.
Think Long and Hard About Debt, Build Cash Reserves
Don’t go into debt for debt’s sake-This has been Berkshire Hathaway’s core mantra since its inception. When you start a business, you may consider taking out a loan to help cover expenses. Debt may be necessary, but you need to be very careful about taking out loans. Berkshire does its best to avoid debt and will only take out long-term, fixed rate loans.
Waren Buffett prides himself in making swift, well-informed decisions and acting on them just as fast. He deems any unnecessary dilly-dallying as ‘thumb sucking’.
Keep Moving, Communicate
Buffett overcame his shortcoming of public speaking and interaction by taking a course early in his life as he understood its importance and serious impediment when it would come to doing well in business. If your start-up is going to succeed, you have to be able to sell it and yourself. Even if you’re bootstrapping, go to as many pitching events as possible and hone your technique. No matter how good your product is, no one will pay attention to it if you can’t convince them it’s worth paying attention to.