Business
Brand/Business
There are a number of extremely
important factors to consider before a business investment, to protect your
resources from the sometimes uncertain elements of an investment environment.
Jumia Travel, the leading online travel agency, shares 5 things to consider
before a business investment.
The business
This is an obvious one. An
investor needs to understand the business in which he/she is investing. Like
Peter Lynch’s investment maxim says ‘Invest in what you know’. It will be
difficult to be cheated in an investment, if you understand the rubrics of that
business. Before investing in a business, study the business; the more you
understand the business, the more confident you’ll feel about the investment.
Additionally, talking to an expert - someone who knows the industry that
interests you - can also help.
The growth
In addition to understanding the
business, it’s important to understand the growth of a business. Consider how
the venture is growing – is its growth organic or does it have more of a buying
growth? Also, consider how the company will grow. To help with this, an
investor will need to dig into the key financial statements of the venture like
the balance sheets, income statements and cash-flow statements.
The exit strategy
Understand and know the exit
scenarios for the industry that will be best for you. As a responsible
investor, it’s best to always be prepared and have an exit plan laid out either
for when the venture reaches the ideal scale intended or when the venture
doesn’t seem to be yielding the returns you expected. Either way, always have
an exit strategy of some kind for every business investment.
Legal counsel
A good number of investors
overlook this very important factor, and end up running from pillar to post
seeking legal counsel when things go wrong. Be sure to seek legal counsel on
all crucial steps of the investment and be sure that every legal document
associated with the investment is shown to a trusted lawyer for feedback.
Prevention will always be better than cure, and in legal matters, ignorance or
oversights is not an excuse. So avoid the avoidable by seeking legal counsel;
you don't have to agree with all your lawyer’s points, but you should at least
understand them and make your decision based on that understanding.
Your comfort zone on risk taking
All investments have some form of
risk associated with it, so it’s therefore important to understand the risks of
a business investment and first decide if the risks are what you can bear. If
you can’t bear the worst case scenario and have no plan B to help deal with the
worst case scenario, then it’s advisable to refrain from such investment. You
must always consider your propensity for risk before putting your resources in
a business investment.
Circumstances that can lead to fraud
This is one of the most important
factors on this list. There are a lot of scam artists out there looking to lure
potential investors into their trap by making their ‘opportunity’ sound
legitimate. But there is a limit to how well they can do this, and if you’re
careful and vigilant enough you’ll be able to see through their facade. As a
responsible investor, ensure you do your research well beforehand, ask
questions and check out the answers with unbiased sources before you invest.
Also, never rush into an investment. In fact, any investment that puts pressure
on you or tries to rush you into it, is a fishy one. You should tread
carefully. Always take your time and talk to trusted family and friends before
investing. Never for any reason rush into an investment, regardless of the
pressure.
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your commet.
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