Warren Buffett recently spoke at a graduation for a program called “10,000 Small Businesses.” The initiative was created through a partnership between Goldman Sachs and LaGuardia Community College. 10,000 Small Businesses assists entrepreneurs in growing their businesses through mentoring and providing access to capital.
Buffett was accompanied by former New York City Mayor Michael Bloomberg and the CEO of Goldman Sachs, among others. You can’t get much more of an elitist insider’s club than that.
I personally have a strong difference of opinion with Buffett when it comes to economics and politics. I am more in line with his father’s views. Howard Buffett was a congressman in the early 1950s who favored reduced government and a return to the gold standard.
Still, Warren Buffett is obviously a very intelligent guy. He has had great success in the business world, even if some of it today has to do more with cronyism and connections instead of purely great entrepreneurship.
Buffett is famous for offering good quotes. He isn’t Yogi Berra, but nobody is. Buffett really does offer some good advice for business and life in general.
When he spoke at this event, he offered the secret to his success in three words: “Delight my customer.” Perhaps it is not so secret, but I’m not sure what to call it when you openly express something and most people ignore it anyway.
Buffett told the budding entrepreneurs, “Tomorrow morning when you look in the mirror after you’ve gotten up, just write — or just put it in lipstick or whatever you want — ‘delight my customer,’ not ‘satisfy my customer.’ ‘Delight my customer.’”
He said, “Any business that has delighted customers has a sales force out there that you don’t have to pay. You don’t see them, but they are talking to people all the time.” In other words, word of mouth (or mouse, in the Internet era) is a big key to success.
We all know this intuitively, but so few people follow this rule emphatically. Most people want to do things their own way, on their own schedule, and in a way that makes them happy. But the key to business is to please the customer.
So Buffett prefers the word “delight” to the word “satisfy.” Either one can work, because even a satisfied customer will tell their friends. But Buffett’s point is that you should go above and beyond just satisfying them.
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A Life Lesson
This rule does not just apply to business owners. It really applies to life, careers, relationships, and many other things.
When most people think about doing something, they think about what is in it for them. Now, I am not saying you should always be a people pleaser. Those who can never say “no” often lead the most miserable of lives.
But if you are trying to achieve something, you really do have to think about the idea of delighting your "customer."
This may apply to bettering a relationship with a friend or spouse. It may apply for someone who is trying to learn from a mentor. Instead of being a burden on the mentor, find ways you can actually help them, and they will be more willing to teach you. You will also learn more in the process of bringing your mentor satisfaction.
If you work in a job, you can view your boss or company’s management as a customer. Don’t think about making yourself look good. Think about how you can make your boss and the company’s management look good. The rest will eventually flow down to you.
And, of course, in business this rule really does apply. Buffett is absolutely correct, and I am convinced that he has taken this outlook throughout his career. You want customers to have a good experience not only for repeat business, but because they don’t live by themselves on a deserted island. They have friends and relatives who may be looking for the same product or service.
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Investing in Companies That Follow the Rule
If you are looking at whether or not to invest in a particular company, Buffett’s three-word piece of advice can also be useful. However, it does have its limitations.
If you find a company that is not continually pleasing its customers and fanatical about doing so, then you should probably avoid it as an investment. Any investment can go up or down in the short run, but if you are looking for a longer-term investment, the company has to be very strong in customer service, unless it gets its money from the government.
But finding a company that does a great job of delighting its customers does not automatically make it a great investment. You still have to look at the fundamentals. A company could be doing a great job with customer service, but if it is selling products for the same price it costs to produce them, then it will obviously be a loser unless the situation is temporary.
Interestingly, Buffett actually used Jeff Bezos, the founder of Amazon, as an example of someone who went out of his way to delight his customers. And it is true. Amazon is a great company, and it has made Bezos very rich. Even many investors have done well.
It is interesting, though, because Amazon’s profitability is very low in comparison to its size. It relies on very small profit margins. But because the revenues are so massive, those pennies add up. Sometimes I question whether Bezos cares too much about his customers and sacrifices the interests of the shareholders.
Delighting customers and delighting shareholders are certainly not mutually exclusive, but there is a difference. Amazon’s sales barely exceed its costs. Customers really should be happy, as they are getting many items near cost.
At this point, I like Amazon more as a customer than I do as an investor.
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Starting a Business
While Buffett was speaking to business owners, his advice is especially important for those starting out.
Too many people start a business by dumping money into a product and a website and everything else before they actually know if someone wants to buy their product.
This isn’t always possible, but the ideal way to start a business is to sell before you produce. You don’t want to order 10,000 units of a product only to find out nobody actually wants it. You are better off ordering or producing 10 units to see if you can sell them quickly, even if the low order number costs you money. You can get your discount for ordering or producing in bulk after you find out if there are buyers.
In a sense, we are all business owners. Anyone who makes money or seeks to make money is selling his services in some way, even if it’s as an employee. We must market our business (ourselves) as such.
But a hiring manager doesn’t want to hear about how great you are. He wants to hear about how great you are going to make his company or division.
Again, I don’t take everything that Warren Buffett says seriously. But on this, he is right. He could have just as easily spoken those words at any college graduation, and not just in front of a group of entrepreneurs.
Until next time,
Geoffrey Pike for Wealth Daily
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