Like many people, I’ve always been intrigued by Warren Buffett. The secret sauce lies in his original Buffett Partnership. They should be the envy of anyone in business.
Anyone can do what Warren Buffett did with the Buffett Partnership and make money. If you want to be rich, just learn the original Buffet formula by looking at his partnerships. There’s nothing unique about them.
What intrigues me about the Buffett Partnership business model is that very little luck was involved in growing such a successful business. To become as rich as Bill Gates, you’d have to be the right guy, in the right place, at the right time. But anyone can do what Warren Buffett has done.
The only roadblock people perceive is that you must understand finance and equities to do what Warren did with the Buffett Partnership. That couldn’t be farther from the truth. The underlying business principles put into place in the partnerships works for any business.
Keep 48% of the upside – Buffett paid out the first 4% of the returns to his partners. He then kept 50% of the rest of the returns as his own cut. That money of course, remained in the partnership. If you own your own business, 100% of the profits are yours.
Reinvest all your returns – Buffett only put in $100 into each Buffett Partnership. He had the 2015 equivalent of $1.2 million in his personal investment account when he started the partnerships. His family lived off the earnings of these investments so he could reinvest his cut of the earnings from the partnerships. You should always reinvest everything you can afford to.
Think of products/services as partnerships – in 1956 Buffett only had one partnership. In 1957, he added another partnership while the 1956 partnership continued to be invested. Once a fund was established and invested, he began developing another partnership which would create another stream of income. For an entrepreneur, instead of creating new partnerships while the other ones run, you could create new products, while the others are still selling.
Aim for 30% growth – Between 1956 and 1966, the Buffett Partnerships averaged a yearly rate of return of 30%. Of course, there were big years and small years. The lowest return during this time was 10% growth. The largest was 47% growth.
Don’t sell time from money – “Law is a slow boat to riches” Warren once told his friend Charlie Munger. Lawyers must sell their time (a finite resource) for money. With the Buffett Partnership business model, Warren could add another partnership (or in your case a product or service) and reap the returns for years without doing much more work than he was doing before. Investing $100,000 is as about as much work as investing $1,000,000.
If you’d like to create a business as successful as the Buffett Partnership, you need only to follow the business model Warren put into place. Craft your business so that you can obtain low costs, reinvest your earnings, create new products/services yearly, aim for consistent growth, and never sell your time for money.
What product or service will be your first “Buffett Partnership?”