So You Want To Be The Next Warren Buffett
So You Want to Be the Next Warren Buffett
by Connie H. Deutsch
As business consultants, part of our responsibility to our clients is to give them sound direction for the decisions they will be making. We should tell them the strengths and weaknesses that we see and give them the appropriate guidance to help them make the most of their opportunities.
In an attempt to give them hope and encouragement, we shouldn't just tell them the good things that are possible, the things they want to hear; we should also tell them what obstacles they may be facing. Wherever possible, we should give them advance warning about the upcoming challenges and tell them what options will be available to them.
The most difficult thing we might have to do is tell someone who is starry-eyed about the prospects of his new business being a major success, that the business doesn't have a snowball's chance in hell of succeeding if he takes a loan based on merchandise that he wants to buy for expansion.
Not too long ago, this is exactly what I had to do. The business, in good times, could have done well with a business loan. However, with the economy being as unstable as it is, this man was basing his expansion plans on the idea of buying merchandise he couldn't afford, selling it quickly to pay off the loan, and coming out with a small profit.
I advised against it for a couple of reasons. For one thing, the merchandise wasn't a special item and for another thing, he couldn't be sure that he could sell it off in time to repay the loan. I'm not adverse to business loans but I am opposed to them when there is very little assurance that it can be repaid without amassing a lot of interest charges and with a reasonable assurance that the merchandise will sell in the specified time that the loan has to be repaid.
My mention of the merchandise not being "special" items has great bearing on the decision. With the Internet being the source of so many bargains you always run the risk that someone bought the same merchandise as you, in quantities larger than you, and got larger discounts based on volume. If that's the case, he can afford to sell them cheaper than you and the small businessman can lose everything. When you have a "special" item that can't be found on the Internet, you can charge regular prices for items that are in demand and not have to worry that you will be undercut.
The global economy is too unstable at the moment for people to take major risks with money they don't have. There is never a guaranty that you will be able to move merchandise off your shelves in a timely manner and now, with so many people out of work and so many households struggling to survive, people are cutting back on their spending and mostly buying just the things that are essential for their needs.
It's hard to give up your dreams of being the next Warren Buffett, but it's better to have a realistic view of the financial picture that's in store for you than to have an airy fairy approach to the way you do business. It could mean the difference between not being able to meet your financial obligations and being forced into bankruptcy, and surviving the worst of times because you took whatever measures were necessary to hold on until things got better.
When my clients become despondent at this downturn economy, I tell them that the unemployment rate in America during the peak of the Great Depression hit nearly 25% and yet there were still people who had jobs, started businesses, and who prospered. And so can you.
by: Connie H. Deutsch
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