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Guest post by: Pia Lord Become an Author

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Gin Rummy Anyone?

As it looks from afar, Berkshire Hathaway is probably the most forgiving of companies when it comes to their policy on underperforming companies. According to their Owner Related Business Principle # 11, they are not inclined to sell off the businesses they buy that do not pan out as successfully as gold.

Nor though, are they inclined to dump lots of new capital into them to prop them up and make them work.

This attitude that they will keep some laggards on the books has been, as stated by them, something that “hurts our financial performance”.

On the other hand they also do not sell any good businesses that they own. Once they have made a decision, it looks, they stick to it, for better or for worse. I guess they like the idea of a Christian marriage over there!

Of the businesses that they have sold, the textile business, they do so when the drag gets to be to large. They sold the textile business, Berkshire Hathaway, after 20 years as the operating losses where occurring year after year. However they retained the name.

What was that ? Gin Rummy? No Thanks!

This business ideas to consider inherent in this principle then are as follows:

*Hold onto to your good businesses.

*Hold onto the ones that are at least generating some cash and have good managerial and labor relations.

*Don’t keep pouring money into businesses that are in industries that are failing.

*Attempt to cure the laggard businesses by focusing on solving their problem areas.

*Consider selling the ones that generate operating losses year after year and where managerial and labor relations are less than good. But consider selling only after having made good efforts to cure the problems.

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Referred by: http://jaykubassek.com

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