Investing in your business is a concept many entrepreneurs are familiar with. Take your profit and put it to work in your business. Grow your business by investing in people, equipment, inventory and anything else that makes sense. There are not many entrepreneurs that can take this concept seriously because they are simply trying to stay afloat and don’t have enough excess funds to manage. For those that can put this concept to work they reap the rewards that come from being prudent and result in having a valuable business.
Berkshire Hathaway released its annual letter to shareholders recently where Warren Buffet, Chairman of the Board, wrote: “Reinvestment in productive operational assets will forever remain our top priority.”. As a company that generates more than $24 billion in operating profit, Berkshire has to be disciplined in its approach to managing capital and has developed a framework or set of principles that it adheres to which have helped it become a massively successful investment company.
Even if your business struggles to produce a meaningful profit there is still an opportunity for you as the entrepreneur to develop some rules around what your business re-invests in. Every business at a minimum is re-investing the time it has available from its team into activities that are producing results. If you considered time the same way you consider profit, would you be re-investing those “profits” into the same activities or would you more selective? Productive activities merit attention but it can be tough to figure out which activities are the productive ones. As an entrepreneur develop a priority list of the top five activities that produce the most meaningful results for your business. Use that list to help you make decisions about how to fix your business or grow it.
