While in high school, Warren Buffet and a friend bought a used nickel pinball machine for $25. They arranged to install it in a barbershop, offering the barber a no-risk proposition – they would split all the profits evenly. Buffet thought customers waiting for a haircut might like something to do. He was right. By the end of the first night, the game had generated $4. At the end of the week, Warren divided the nickels into two piles. The boys’ share was $25, enough to buy another pinball machine. Soon there were eight pinball machines in barbershops all over Buffet’s hometown. From the book, The Snowball: Warren Buffet and the Business of Life.
Eventually Warren and his friend sold their venture. Buffet used his portion of the proceeds to buy stock and launch another business. At 26 he’d accrued $174,000 – the equivalent of $1.4 million dollars’ in today’s market.
Warren Buffet is recognized as the most successful investor of the 20th century. He learned the value of reinvesting early on.
When you own a business, reinvesting is crucial to your company’s growth and success. The amount you should reinvest will vary. The key is to have a strategy, rather than set a percentage.
Successful entrepreneurs from Henry Ford to Warren Buffet and Bill Gates have made their wealth by investing wisely, not just once but as an on-going effort. Create a simple reinvestment plan and communicate it with clarity and passion. Then put it into action.
A quote from the book The Snowball sums it up:
“Warren had discovered the miracle of capital: money that works for its owner, as if it had a job of its own”
The road is easier together,