There seem to be untrue facts that circulate among the business and investment community for years. Many of the investors are afraid to invest in companies that are not from the tech industry or don’t offer the innovative idea. Although it is the inevitable truth that software startups and companies that offer unique technological solution are performing better on the market, still there are exceptions.
Even startups that are operating in a less popular industry like health or visual arts can be profitable. Aiming high by doing a standard investment in easiest website builder for small business can be a good idea but maybe investors can diversify their portfolio by believing in other industries as well.
The most important question for a small business investor is where to focus their attention. What makes one company more interesting than the other? It’s not only the industry, is the idea and the business model as well. Each investor should follow a certain strategy for their investment activities. Here is how investors can make better decisions and smart investments.
1. Invest in the CEO
In a small business, you always need to invest more in the owner than in the business itself. Therefore, you need to invest in a CEO you believe. There isn’t any formula that will help you evaluate the leadership skills and talent to a person. However, arranging a meeting or a conference call can help you understand the drive and the motive of the CEO better.
Always invest in people that are passionate about what they are doing and that have a vision for the future.
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2. Safe revenue and cash flow
Safe revenue is a portion of the revenue that is going to continue in future. The secure revenue is important since it will provide you with a safe fund that the company can rely on in future when you decide to expand. If you have frequent purchase and service cycle then you can be sure that company will have enough money to cover all of the fixed and variable costs so that the rest of the funds can be used for growth.
3. Idea strength
It can be tough to determine if a certain idea will succeed or fail in the market. We often ask ourselves Does this brand offer something unique? Difficult to answer but a good market analysis might help you determine if the idea will be successful.
Before you make your decision always request a throughout analysis of consumer behavior on the potential market. Surveys, questionaries’ and testing sessions are excellent tools that will help the startup to define the volume of the demand for the product on the market. If they haven’t conducted any research yet then you shouldn’t invest in the idea.
Going blindly on the market and expecting people to like your product or service just because you think is smart and great, it’s a bad decision. There is nothing smart in investing tonnes of money into something that only looks good on paper. Look for facts and research before you make your final decision and invest money into it.
If you open your mind and explore unconventional ideas, you will be surprised by the potential small businesses can offer. Sometimes it’s not about the social media company, a professional website builder for business or automation software. Don’t follow trends that might look shiny from afar, follow ideas.
If we had to define a good investment, it would be something like this: A smart investment is a well-researched decision to invest a certain amount of money into a unique business idea and expect high ROI. Investing is not only referring to funds and money, investing means research, analysis, passion and belief in the value that the business idea will offer on the market.
Various definitions exist on the market; however, the common denominator is always quality research and calculated risk. These two factors will determine the success of your investment activities and the quality of the ROI. If you combine the three suggested tactics we explained above it’s inevitable that you will make a calculated investment decision that will improve the status of your investment portfolio greatly.