Business is a constantly changing world. Markets change as do the tools for reaching customers. From SEO to social media marketing, the business world is unrecognisable from where it was just 10 years ago. Consequently, investing in business is increasingly complicated with a raft of new and alternative options to consider. Before you take the plunge, it’s important you do your research.
Analyse your finances
The first stage of any research process is to analyse your own personal situation. Whether your planned investment is personal or on behalf of a business, you need to know the financial situation inside out. Establish how much money you have to invest and what the implications of various investment outcomesare. This will help narrow down the kind of investment which will be most appropriate for you. Only when you’re armed with this detailed knowledge should you investigate the opportunities available.
Invest in what you know
If you focus on businesses that operate in an area that complements your own knowledge, you will immediately have an advantage. Your technical expertise will help you sort the wheat from the chaff to minimise the risk of a dud investment. What’s more, you’ll be in a stronger position to monitor the development of your investment and to predict the right point to implement your exit strategy.
Keep an open mind
While investing in what you know is wise, it’s important to keep your options open if you want to make the most of the investment opportunities out there. Consider all investment types and opportunities and weigh up the pros and cons of each, including your level of knowledge and previous exposure to each option. Your knowledge of the industry or investment type should be a significant factor in your decision-making but it shouldn’t be the only factor. Sometimes an investment opportunity is so compelling that it will be the right option for you, even if it represents a new direction.
Talk to the experts
If you decide it’s worthwhileto invest in a new direction, you’ll need to mitigate your lack of personal expertise so getting adviceis absolutely critical. Seeking advice from skilled experts is likely to be the single best investment you ever make. As we’ve already discussed, knowledge is key to sound investment. The knowledge doesn’t necessarily have to be yours though. If you can leverage the knowledge of others, you’re on the way to a successful strategy.
Consider what level of involvement you want
When planning your investment strategy, a question you need to ask is how involved do I want to be? A direct investment into a business will give you both opportunities and responsibilities to get involved in the running of the company. This may be ideal but if you’re looking for a less active role, then alternative means of investment, such as buying shares, could be more suitable. Whatever you decide, the key is to match the investment to your needs, not just in terms of potential returns but also your desired level of involvement.