What does it take to build a successful company from scratch? What does it take to become a billionaire from scratch? Well, i advice you read on as i share with you seven business lessons from Warren Buffett, the world’s richest investor and CEO Berkshire Hathaway.

Who is Warren Buffett?

Warren Buffett is one of my most respected business mentors. Most people recognize Warren Buffett as the richest investor in the world and he absolutely is. But what most people has never given a thought is that Warren Buffett is an entrepreneur; a successful entrepreneur to be precise.

Forbes magazine regards Warren Buffett as the man that made his entire fortune from the stock market. While they may not be wrong, I think this fact is been misinterpreted. Wealth is not judged by one’s activity; it’s the “behind the scene” business that makes the big difference. Warren Buffet did not become a billionaire by buying and selling stocks; he became a billionaire by building Berkshire Hathaway and used the company as leverage to buy other companies.

Building a business (Berkshire Hathaway) and selling shares to the public is what made Warren Buffett a billionaire; not trading stocks. And I think it’s worthwhile you know that Warren Buffett doesn’t invest in stocks; he buys businesses. He’s not interested in the stock price; he’s more interested in the “business” of a business. Now what does it take to buy a business successfully?

It takes business intelligence to spot a good business and you can never acquire such intelligence unless you are a business owner. This is why I regard Warren Buffett as an entrepreneur as much as an investor. I got the inspiration for this article by asking myself this question: if Warren Buffett was to invest in my business, what would he look out for? So it’s based on this finding that I bring to you seven business lessons I have learned from Warren Buffett.

7 Best Business and Investment Lessons from Warren Buffett

1. Understand your business to the core

“Never invest in a business you can’t understand.” – Warren Buffett

If there’s anything Warren Buffett understands to the core; it’s Berkshire Hathaway. Why? The reason is because he has been in the financial services industry for years and has a wealth of experience running Berkshire Hathaway.

When the dot com boom began; many entrepreneurs and companies were jumping to start their own web based business but Warren Buffett refused to budge because he doesn’t understand the technology industry. He only understands financial service businesses and he has stuck to this industry.

“If you understood a business perfectly and the future of the business, you need very little in the way of a margin of safety.” – Warren Buffett

2. Know your numbers

Accounting is the language of business.” – Warren Buffett

How well do you know your business numbers? Every business operation or dealing must reflect in the book; now the question is: how well do you understand the books? It’s said that cash flow is the life blood of business. How do you manage your business cash flow if you don’t understand the books?

I think the message Warren Buffett is trying to stress here is the importance of financial literacy and accounting. You can never have maximum control of your business if you don’t understand its numbers. By knowing the numbers of Berkshire Hathaway; Warren Buffett has kept the company financial position strong, even in times of recession.

3. There’s no absolute business failure

When Warren Buffett took over Berkshire Hathaway; it was an ailing textile company. Yet, Warren Buffett stepped in with a resolve to turn around its finances. Did he succeed? The answer is no. Berkshire Hathaway was already a dead business and a failure but Warren Buffett was able to see what others couldn’t see; its subsidiaries.

Armed with these uncovered assets; Warren Buffett repositioned Berkshire Hathaway to become one of the most valuable companies in the world.

This incidence emphasizes Warren Buffett’s lesson that there’s no absolute business failure. Even a dying business has some underlying assets; but it will take a trained eye to discover such asset. That’s the more reason why you should know your numbers; assets are identified through the numbers.

4. Management is vital to running a successful business

“When a management with a reputation of brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” – Warren Buffett

It takes an entrepreneur to successfully start a business but it takes a competent management team to sustain and grow that business. Management is one of the key features Warren Buffett looks out for when buying a business because with a sound management, sustained profitability is sure.

“Somebody once said that in looking to hire people, look for three qualities; Integrity, intelligence and energy. If they don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without the first, you really want them to be dumb and lazy.” – Warren Buffett

5. Pick your associates carefully

Who are your business associates? Who is your business partner? Who are the members of your business team? Warren Buffett’s success in business and investing can be attributed to his long standing friendship and partnership with Charlie.

Entering into partnership is like marrying a wife; if things don’t go as planned, it might leave a bitter taste in your mouth. So pick a partner who you have a long standing friendship with; pick a partner with a positive mindset and most importantly, choose a partner whose strengths complement your weaknesses.

“It is better to hang out with people better than you. Pick out associates whose behavior is better than yours and you will drift in that direction.” – Warren Buffett

6. Think long term

The reason most businesses fail is because the entrepreneur or management is too short term focused. The ability to think long term is a lesson I learned from Warren Buffett. Warren Buffett is still alive at the time of this writing but he has already drawn a long term plan that will guide Berkshire Hathaway after his demise.

Warren Buffett doesn’t invest in a business that has no long term plan because he isn’t investing for short term. So why should you build a business without a long term goal?

Most entrepreneurs are too profit obsessed and that’s why they drain their business resources without recourse to the business long term needs. Entrepreneurs that think long term take care of their customers and strengthen the business internally by re-investing profits. Businesses that stand the test of time are businesses that are run on long term projections.

“Focus on your customers and lead your people as though their lives depend on your success.” – Warren Buffett

7. Know thyself

If there is a character I learned from Warren Buffett; it’s integrity. Integrity doesn’t only represent honesty; it encompasses all aspect of life. What is your personal philosophy?

“It takes 20 years to build a reputation and only five Minutes to ruin it. If you think about that, you will do things differently.” – Warren Buffett

I have taken a critical look at companies that have sustained the pace in their various industries and I see something common at the core of these companies; which is integrity. Integrity is not in-born in any business; it is transferred into the business from the entrepreneur.

If integrity is your watchword; it will reflect in your company’s culture. Aside all this rambling; the core is that you know yourself. Remain true to your philosophy; and stick to what you believe in.

As a final note, these are the seven business lessons I learned from Warren Buffett; the richest investor in the world. Imbibe these lessons and I will see you at the top.