In business, we have a term called…
A “Cigar Butt”
Essentially, it’s referring to a business that is coming to the end of its life.
Or, put bluntly… dying.
It might be caused by the end of an industry, a new technology, or it being obsolete.
Think – Kodak and VideoEzy.
Cigar butts are real.
If you are in one of these businesses, or fear that it could be on the horizon one day.
Just know that it isn’t necessarily a wipe-out event.
Well, it mainly depends on how you approach it.
Warren Buffett was famous for buying into industries that investors had fled from.
He invested in businesses that only had 10-20 years of operating left,
But rather than avoiding them like everyone else,
He would analyse the asset values inside the business
And would attempt to buy the shares of the company cheaper than all their assets were worth.
After he fully extracted the businesses’ net profits,
He would use its liquidation payout to profit further and invest in other opportunities.
Now, I think the underlying lesson here is incredibly important.
When put in that scenario, you don’t have to run.
Why not set up your business to diversify the profits into investments and liquidate your assets once the business has run its race?
To be totally honest here…
As business owners, we have to be realistic.
Pretending it’ll last forever could be dangerous.
Some industries have a defined end date.
This might be you, your services, or your overall business.
What you do in business and how you do it, will evolve continuously over time…
If you are in a cigar butt business, that’s okay,
For now, the outcome you achieve is still within your control.
In this week’s podcast episode, Grant and I are breaking down how we would play the situation.
We’ll be discussing:
- Saving your business
- Holding on to your legacy
- As well as investing, pivoting and more!
Tune in now!
PS: Do you think your business is a cigar butt? Let me know, as I would love to hear your thoughts on how you are playing it.
All information we share is NOT financial or investment advice and is purely intended for entertainment and educational purposes only. Always seek professional advice before acting on any financial decision
00:00 Welcome to Business and Investing
02:08 What is a cigar butt in business and investing?
07:25 Looking into the future of businesses
10:16 Cigar butt businesses
15:28 How will technological advancement shape the future?
24:27 Dealing with developments and saving your business
31:00 Holding on to legacy
33:12 What to do if your business starts to become a cigar butt
39:35 Starting or investing in a cigar butt business
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