For 10 years, Mike Flint was Warren Buffett’s pilot. One day, he was discussing his career priorities with Buffett, when the boss asked the pilot to follow a three-step exercise.
Step 1: Buffett asked Flint to write down his top 25 career goals. So Flint spent some time pondering and then wrote them down.
Step 2: Next, Flint had to review and circle his top five goals. Again, Flint took some time and zeroed in on his top five career goals.
Step 3: Now, Flint had two lists – A and B. The A list included his top five goals and the B list included his remaining 20 goals. Flint admitted to Warren Buffett that he understood which goals he had to focus on and which he had to put on the backburner.
To which Buffett replied, “No, Mike. Everything you didn’t circle just became your Avoid-At-All-Cost list. No matter what, these things get no attention from you until you’ve succeeded with your top 5.”
Through this exercise, Buffett gave Flint the blueprint to success: a laser-like focus on one’s priorities and the ignorance of everything else.
Buffett himself follows this practice to the T. His priority is to identify and buy companies that are great earnings machines at good prices. This is why he spends most of his days reading 500 pages of financial reports and documents.
Buffett sticks to his priorities, and they pay rich dividends, literally! If you had invested $10,000 in Berkshire Hathaway shares in 1965 (when Warren Buffett took over), you would’ve made $274 million by the end of 2019! That’s a 20 percent Compound Annual Growth Rate (CAGR) of for over five decades!
What Every Entrepreneur Must Do to Succeed
As an entrepreneur, you’re the driving force behind your company’s growth. Like it or not, your business is a reflection of you, and not the other way ‘round.
Entrepreneurs have to do difficult things. Like scaling up quickly, extending product lines or diversifying, building assets that become the company’s moat, evaluating new opportunities, and so on. And their minds can go crazy thinking about the new, exciting things they can do apart from what they’re already doing.
But falling prey to this temptation when your core business is struggling means you’re either running away from or giving up on your priorities. And no entrepreneur who does this can succeed.
For instance, a business acquaintance of mine is currently facing trouble with wafer-thin profit margins. The list of clients who purchased from him in the past includes blue-chip companies. But he’s not able to convince them to buy again.
While he blames cut-throat competition for this, he also admits that he hasn’t delivered satisfactory service to these clients. Orders got delayed, the wrong products got dispatched, his team didn’t show professionalism. But instead of prioritizing these core problems, he wants to diversify into the renewable energy sector (an area he has zero expertise in) because it appears lucrative.
By ignoring his real priorities, he could end up mortgaging a stable future in exchange for a comfortable present.
So what are priorities?
They’re action points that emerge from your long-term goals. A goal gives you a direction to move in and tells you how much energy you must invest in the actions that will lead to them.
As an entrepreneur, your priorities are not fire-fighting or addressing every problem that arises, but to do the tasks that cannot happen without you. Like setting a direction for the organization to move in, increasing cash flow, building relations with important stakeholders, and creating a culture where people want to give their best every day. (If you say nothing at the office can happen without you, your leadership skills might need some readjustment.)
Obsess Over Your Priorities
My priority is to make SME Value Advisors the best platform for leaders in the SME sector to find all that they need to improve their business.
So I spend a disproportionate amount of time reading and thinking over how we can create more value for our customers in ways that generate wealth for stakeholders and me. Then I implement those ideas and follow up on them with my team.
These priorities help me move ten steps in a single direction rather than taking one step in ten different directions. They show me which aspects of my business to strengthen and which I can ignore. And they help me set boundaries; I can say “no” to the bad and the good opportunities so that I can say “yes” to the great ones.
Here’s some remarkable advice from management guru Peter Drucker on setting your priorities as an entrepreneur.
To focus on priorities means to clean away the clutter. – Peter Drucker
Unless you remove the clutter, you won’t be able to see things clearly, identify what to focus on and what to ignore. In other words, you won’t know your priorities.
I’ve learned much from Warren Buffett. Like looking for specific things in people. Like harboring the desire to remain a lifelong learner while sticking to one’s circle of competence.
But the biggest lesson I’ve learned from him is to be clear on my priorities and stick to them, and that they cannot be driven by others.
Set your priorities. Be brutally disciplined with them, not just in your actions but also in your reviews. This will let you gauge whether you’re investing your precious resources in the right direction.
The results will seem almost invisible at first. But in the long term, they’ll compound and you’ll end up delighted with the outcomes.