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Applying Warren Buffett’s Rules for Success to the AE Industry: Part 2
In the last edition of The Five, I discussed 5 of Warren Buffett’s 10 rules for success and how they apply to the AE industry (you can read that post here). Today, I will continue that discussion with the last 5 rules, so let’s get started!
6. Limit what you borrow
When it comes to running a business, this rule rings true in any industry. Simply put, over-borrowing leads to increasing debt, and once you are over your head in debt, it’s hard to recover. If you are low on cash and considering a loan, just remember that there are some expenses that you can go without until you get your cash level up to where it needs to be. Employees’ salaries, for example, are an expense that would warrant a loan because your employees rely on you for their well-being. Other expenses, such as your own salary (if you’re an owner), might be better off going unpaid than getting a loan. Ultimately, the choice is up to you. Just remember that debt is a slippery slope that you do not want to mess with.
7. Be persistent
Persistency is a virtue that can be applied to many areas of the AE industry, but in my mind there are two areas where persistency matters most: collections and the development of young employees. When it comes to collections, being persistent is important simply because your clients are so busy. It’s not that they do not intend on paying you (well, some of them may not want to), they just don’t have it at the top of their mind. Send them multiple reminders, or use one of the other methods I covered in my post about collections.
Developing and mentoring young talent can be a chore; I know this because I am a year into my first engineering position, and I can see the time that senior employees take to teach me. Be persistent in this process, because it may take a few times before a young employee is able to pick up certain principles. Put in the work now, and they will be there to lead your company in the future.
8. Know when to quit
This one is tough for me to discuss, because I’ve always been taught never to give up on what I wanted. For Warren Buffett, he learned this rule after continually placing unsuccessful bets on horses at the racetrack when he was a boy. In the AE industry, “know when to quit” applies to your clients, and specifically the ones that give you headaches time and time again. At the firm I work for, we exercise the 80/20 rule, which means that 80% of your work is going to come from 20% of your clients. Your goal is to find that 20% that you work well with, and do whatever you can to maximize their role in your company’s backlog. Clients that do not pay on time, are not accountable for their mistakes, and always ask for unreasonable deadlines should not be in your 20%.
9. Assess the risk
As I mentioned in part 1 of this post, Warren Buffett’s business decisions usually involve the gain or loss of millions of dollars, where a rule such as “assess the risk” is very useful. Now I can’t be certain, but I am guessing that the daily decisions that you have to make in the AE industry aren’t of quite that magnitude. You estimate how long it will take you to complete a job, and place a bid on that job that will give you a profit, which is usually fairly modest. There’s not a whole lot of risk involved in the process if you know what you are doing. With that being said, do your best to figure out exactly what risks are going in to each decision you make. When you hire a new employee, determine if their skillset and experience is worth the time that you will have to give up to teach them. When you are thinking about implementing a new technology, make sure the price you are paying and the learning curve you must overcome are worth the improved efficiency down the road. But remember, after you assess the risk, make your decision; don’t sit around sucking your thumb.
10. Know what success really means
Success means something different for everyone, and you need to figure out what it is for you. Right now in my career, success for me will be attaining my Structural Engineering License. It’s something that I have wanted to do for a few years now, so I am going to work until I achieve it. As Jared Perry said in his first post in the How to Start Your Own AE Firm series, define what your expectations are and work diligently until you achieve or surpass them. And when I say define, I mean write them down. Do it today if you haven’t already. Putting down your goal of success on paper is a way of holding yourself accountable.
I hope that you were able to take something away from my discussion on Warren Buffett’s 10 rules for success in business and how they apply to an AE firm. As you can gather from reading this, some rules are more applicable than others, but they all offer something that can help you become more successful in the AE industry. If you have anything to add, as always, I urge you to post it in the comments so that all of our readers can gain from your perspective.
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