5 Business Lessons from Billionaire Investors

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Think you've got nothing in common with the likes of billionaire investor Warren Buffet? Think again. Turns out you can glean some important business understanding by taking a close look at what makes billionaire investors successful in what they do. Success: that's a nice thing to have in common.

They Choose Proven Industries

Buffet, and others, can well afford to take a risk or two, but their hallmark is not investing in risky new ventures and unknown industries. Rather, billionaire investors tend to put their money into industries which have proven themselves both in long-term demand and profitability. While the newest, most innovative, and interesting option is always tempting — who doesn't want to be smart enough to know about the next big thing, and make huge sums of money from it? — it isn't a sure bet, nor even a good one.

Business Take Away: Invest your time and money in what has proven to have a strong ongoing demand and/or a strong ongoing returns for your business. You can apply this principle to everything from employees to strategies, innovation, and products. Marketing, for example, continues to morph as we continue to refine Internet marketing methods. You should track your ROI in the online marketing you do, then invest more of your marketing dollars into efforts that work. The same goes for managing people; if a position opens up in your company, look at the employees you already have who have proven capable, trustworthy, and productive. Would one of them fill that spot? If you have an employee who has proven worth to your business, then it's a low risk to invest in a higher salary and higher level of responsibility for that employee.

They Are In It for the Long Term Investment

Investing in the stock market is not a get-rich-quick plan, and rarely does it work that way for investors. Billionaire investors look at stocks that will grow in value over time, and put money in early on, not expecting to pull a profit from it in a few months or even in a few years.

Business Take Away: You may find yourself with a runaway product, bringing in more profits than you ever imagined within your first year or two, but those scenarios are rare. The more common scenario is months and years of building slowly, finding investors, tracking money, building a brand, delivering on promises, and moving into profitability with a steady climb from the beginning. Climbing, by the way, is tough work.

They Know Where Their Money Goes

When you've got billions to invest, it seems like it might not be a big deal to toss a few million here, a few million there, and not worry too much if you lose some. But the smart investors — the ones who continue to have that kind of money to invest, year after year — are not careless with their money. Carelessness in small amounts of money is a sign of carelessness in general, and when money is your business tool, you've got to treat it with respect and care.

Business Take Away: As a business owner or manager, or as a sole proprietor (freelancing, anyone?), you have to know where your money goes. This matters in terms of your time — are you spending hours on jobs that you could outsource or assign to an employee? — and in terms of the actual money flowing through your business. You need to track income and expenses, spot disparities, and continually check for holes where money may be slipping away, taking profit with it. That doesn't mean that you have to be money-driven, but it does mean that you have to be money-aware. You simply can't run a successful business and be ignorant about the money involved in it.

They are Constantly Learning About New Opportunities

While billionaire investors are not going to be swept away in the next big fad (see Choosing Proven Industries, above), they are in the habit of constantly watching the market, learning about new opportunities, and staying aware of technological developments, political changes, and other trends that impact the market, the economy, and how they can best invest in it.

Business Take Away: The parallel is rather obvious. You have to be aware of what is happening in your business, among your competitors, and with the market demand in general. If your main competition has just released a smashing new product that could threaten the survival of your business, you'd better know about it. If a shift in the economy, or a new development in technology, can cause your target market to shift into new buying habits, you'd better know about it. Your business survival depends on your ongoing, continuing knowledge of what you sell, what your competitors sell, and what your market wants to buy.

They Don't Rest on Past Successes

If anyone could rest on their laurels, these folks could. As a billionaire, do you really need more money? But most of big investors continue to watch the markets, to learn, to share their knowledge, to invest in new businesses and old ones, to plan for the long-term returns they may not even be around to see.

Business Take Away: You've got to keep moving forward. Innovation is a key to business success. Peter Drucker says "systematic innovation" is one of the "universal entrepreneurial disciplines," and a "condition for survival." After a tough climb up the business mountain, you'll be tempted to sit back, take a break, and just let things roll long. Do that, for, say, two or three days. Then get back to work. The challenge of running a business is that the formula that worked for initial success is not going to be the formula that works for ongoing success. Unless you are leading the business forward, you'll find yourself failing merely because you're attempting to repeat the past while everyone else is marching into the future.