Building a Small Business that Warren Buffett Would Love

The book that presents the same fundamentals that Warren Buffet used to turn an initial $105,000 investment into a $40 billion fortune in a way the general reader can apply, Building A Small Business that Warren Buffett Would Love is a succinct, logical, and straightforward guide to financial success. Highlighting one simple message: that Warren Buffett successfully invests in great businesses with strong fundamentals, it argues that these fundamentals can be replicated in a small business to yield outstanding results. Offering a solution for people wanting to start a business to provide additional income in today's uncertain economy, and designed to help entrepreneurs build fundamentally sound, small businesses using Warren Buffett's business investment perspective, the book covers:

• An overview of Warren Buffett's investment methodology and how it applies to small businesses
• The details of the Buffett investment criteria—a consumer monopoly, strong earnings, low long term debt, and high ROE with the ability to reinvest earnings—and the application of these fundamentals to both start-up and existing small businesses

An approach to building a small business that applies the well respected principles of Warren Buffett, the book presents an exciting new look at the steps to success that have been proven trustworthy by one of the richest men in the world.

Foreword ix

Acknowledgments xi

Introduction Painting the Picture of the Ideal Business 1

Chapter 1 Buffett and the Fundamental Business Perspective 9

Chapter 2 The Importance of a Consumer Monopoly or Toll Bridge 19

Chapter 3 Strong, Consistent, and Growing Earnings 31

Chapter 4 Emphasizing a High Return on Equity 51

Chapter 5 Retained Earnings—The Fuel for the Engine of Compounding Returns 81

Chapter 6 The Tumor of Long-Term Debt 131

Chapter 7 Keeping Up with the Joneses 147

Chapter 8 With Healthy Net and Gross Margins 157

Chapter 9 Building a Small Business That Warren Buffett Would Love—Finishing the Landscape 167

Epilogue 175

Notes 185

About the Author 189

Index 191

ADAM BROWNLEE is the author of three books on business and investing. As the former Director of the Kentucky Small Business Development Center at Western Kentucky University, he has assisted hundreds of small business owners in making key decisions about the refinement and reformation of their businesses.

Every great business—whether it’s a popular pizza restaurant or a baby formula maker—is built on the same core fundamentals. Warren Buffett figured out this universal business truth at an early age, and used it to turn an initial investment of $105,000 into a massive $40 billion fortune. Building a Small Business that Warren Buffett Would Love takes this sound investment methodology and adapts it for small business owners looking to build, grow, or improve their own businesses.

Taking a long, hard look at Buffett’s investment choices, business and investing guru Adam Brownlee identifies the common principles that link the many companies that populate Berkshire Hathaway’s impressive portfolio. Highlighting the essentials that make these businesses great—from their strong earnings track records to their ability to successfully raise prices to match inflation—the book presents a road map for transforming your business using the same simple values that define these economic powerhouses.

Humorous and accessible, Building a Small Business that Warren Buffett Would Love looks at some of the world’s most successful businesses—Coke, Hershey’s, McDonald’s, and many others—to demonstrate the sound logic and plain-to-see success of Buffett’s way of doing business. Packed with essential information for start-ups and existing small businesses looking to take things to the next level, the book includes everything budding entrepreneurs need to know to build fundamentally sound small businesses that will not only survive but thrive in today’s uncertain economic climate.

Warren Buffett redefined successful investing when he figured out exactly what makes a successful business tick and then put his money into those businesses—and only those businesses. It worked for him, and it can work for you. With this book in hand, you’ve taken the first step towards creating the kind of small business that not just Buffett, but any intelligent investor, will love.