Pricing power most important in business: Buffett

NEW YORK: Warren Buffett, the billionaire CEO of Berkshire Hathaway, said he rates businesses on their ability to raise prices and sometimes doesn’t even consider the people in charge. “The single most important decision in evaluating a business is pricing power,” Buffett told the Financial Crisis Inquiry Commission last week.

“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. If you have to have a prayer session before raising the price by 10%, then you’ve got a bad business.” Buffett accumulated the world’s third-largest personal fortune through a career of stock picks and takeovers.

He has bought companies like railroads, whose pricing power stems from a dearth of competitive options available to clients. Buffett has also built stakes in firms which rely on the appeal of their brands to attract customers.