Four Core Areas of Indie Business Strength
Last Saturday, Warren Buffett, CEO of Berkshire Hathaway, Inc., released his annual shareholder letter. In it, he recaps 2008, including detailed overviews of his company's performance in key areas of operation: regulated utilities; insurance; manufacturing, service and retailing; finance and financial products; tax-exempt bond insurance; and investments. I enjoy reading Buffett's annual reports because they always contain things I can put to work in my business.
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The 2008 report contains a summary of how Buffett leads his business by structuring it around specific broad-based goals. Since his example provides a simple, high level overview of what all Indie Business owners must do to successfully lead our businesses, I thought I'd share them with you and see what you think.
1. Maintain a "Gibraltar-like" financial position. This means that the business has a high levels of liquidity so that some cash is always on hand. It also means that borrowing is kept to a minimum, and that any debts are well-managed and short-term only.
2. Maintain ever widening "moats" that create"durable competitive advantages. This indicates a constant effort to create new and distinct value-added products and services that keep the business from looking like other businesses that provide similar products.
3. Acquiring and developing new and varied streams of earnings. Doing this means that all of the business eggs are not in one basket. When one income stream slows down, others can subsidize it until things even out again. When one income stream disappears completely, there's a back-up. Whether or not you have a traditional job, using your Indie Business to tap into the vast well of your talents and gifts to create new income streams is a wise way of planning your life. Always have a hustle that allows you to maintain more than one way to provide for you and your family.
4. Nurturing employees. Whether or not you have formal employees like Berkshire Hathaway, you must maintain a team of friends, family members, advisers and independent contractors to encourage you and give you advice. Investing in your team members and caring genuinely about their well-being will help them succeed and cause your business to grow.
What do you have in common with Warren Buffett?