Warren Buffett on the One Difference in a Great Business

November 6, 2018

You’d think management is the most important investment consideration for Warren Buffett, the man commonly regarded as the greatest investor of our time.

On the contrary, notes Buffett: “the extraordinary business does not require good management.” Think about this:  not only does an exemplary business not require exemplary management, Buffett says, it doesn’t even require good management.

The most important factor in a great business, Buffett says, is pricing:

The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.

There’s comfort here for you as a business owner. You don’t have to be a Harvard MBA. You don’t have to be the best marketer or a particularly eloquent speaker. Your expenses don’t need to be the lowest in your industry. Your business doesn’t need to be the biggest or be a household name. You don’t have to have the largest share of the market.

If you develop a business with pricing power, you win. It’s that simple. Good pricing strategies cover a lot of other mistakes you’ll inevitably make in your business.

(Photo credit: Wikimedia Commons)

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About me:  I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Want to talk? Call me at 404-287-2627.

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