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Applying Warren Buffett’s Rules for Success to the AE Industry: Part 1
Obviously you all know who Warren Buffett is, so I’m not going to go into detail about how he’s the third richest person in the world, the CEO of Berkshire Hathaway, and one the greatest philanthropists the world has ever seen. This article, on the other hand, is about the lessons that can be learned from a man that has achieved so much in his lifetime. Warren Buffett says he relied on 10 rules for success in order to get to where he is today. These rules can undoubtedly teach us all something valuable about business. For today’s edition of The Five, I will discuss how the first 5 rules from Warren Buffett’s list of 10 can be applied to the AE industry, and what we can learn. The latter 5 will be covered in the next article, so stay tuned!
1. Reinvest your profits
If you own your own AE firm, you have without a doubt heard from many sources that you should always reinvest your profits. This is one of the most important keys to growing your business. In my mind, there is a common misconception that reinvested profits need to be spent on literally growing your office. By this I mean hiring more employees, expanding your current office, or opening up new offices. Don’t get me wrong, these are important, and there will come a time where you can use your profits to do these things. But first, you need to ask yourself one question: “Are my employees happy, and are they getting everything they deserve?” There is no use in hiring new employees if your current ones are not happy. Buy the newest technology, remodel your mid-nineties looking workspace, or set aside a fund to buy your employees lunch on Friday. Remember, happy employees are productive employees.
2. Be willing to be different
According to Jack Stack, author of The Great Game of Business (you can read a review of the book by our own Alex Smith here), there are only two ways to make money in business. One is to be the least-cost producer, and the other is to have something that no one else has. When you’re trying to secure a contract, it would be nice if you were always the least-cost producer. Unfortunately for you, though, there is no way to know what your competition is going to charge for the same project. Something you can control, however, is your architecture and/or engineering services (your product). Make it different and make it better. If you can find a way to do that, and combine it with a competitive price, then there is good chance you will land more projects for your firm.
3. Never suck your thumb
“Thumb sucking” is a term that Warren Buffett uses to describe the period of unnecessary time spent thinking and waiting when it comes to making decisions. And while most of his decisions most likely involve the exchange of millions of dollars, you can still use this rule every day.
There is no use in sitting around and waiting; the information is not going to change. Waiting to make a decision causes a lot of unnecessary stress and worry, which is not good for anyone. Make your decision, and stick by it.
4. Spell out the deal before you start
This rule, to me, screams “scope creep.” If you don’t know what I mean by scope creep, it’s the little things that your client asks you to do that were not included in your original contract. At first, you do it as a favor, but these hours start to add up, and before you know, you’ve performed 10 hours of free work that should have been an add-service.
The best way to prevent scope creep is to be very detailed in your original proposal. Ask questions and make sure that you understand every aspect of the project before you submit your number. As you perform the job, refer back to your original scope often to see if you’re being asked to perform extra services. You work hard at your job every day, so make sure you are getting what you deserve
5. Watch small expenses
At my AE firm, we have recently started to think about how we can save money by paying attention to the small expenses that we would otherwise just pay for blindly. To name a few examples, we have switched to using cotton towels in the bathrooms in place of paper, and we are making our own notepads out of recycled paper. It may not seem like you are doing much, but saving a few dollars here and there can really add up. Additionally, we have a group of communal “supercomputers” where we install all of the expensive software that we need to run our business. If someone in the office needs one of these programs, they simply head over to the lab and work there. By doing this, we avoid having to buy software licenses for every employee in the office, and we save a lot of money.
As I mentioned earlier, we will cover the second half of Warren Buffett’s 10 rules for success in the next edition of The Five. Until then, try applying some of these to see how they can benefit you. Also, if you see any other aspects of the AE industry that fit under one of the rules that I discussed, mention it in a comment so that all of our readers can gain from your perspective.
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