You have always been interested in investing in a business, however you always hold back because you are scared of making a bad choice and losing your investment. However, there are some ways to evaluate businesses to reduce the risk you are taking when you invest. Of course, risk is never eliminated, but when you properly evaluate what makes a business worth investing in then you will more than likely have your answer whether the company will be a success or failure before you invest your dollars. The following tips will help you make the right investment.
Investment Tip #1 Management
When deciding whether a business is worth investing in or not you need to evaluate the management because a business really is only as successful as its management. Because of this you want to evaluate if the management is knowledgeable, rational, and able to make the right choices to make the company money and prevent it from losing money. Of course, this is an easy question although the answer is a little more difficult.
Investment Tip #2 Business Plan
A business plan that is well laid out and shows positives, negatives, and how the company and management will handle problems within the business is very important. A good business plan shows that management knows where the company is, where it wants to go, and what it needs to do to get there. Be sure you take a look at a company’s business plan before you invest.
Investment Tip #3 Return on Investment
The ROE, or return on investment, is also crucial when you are considering making an investment in a company. Of course, the ratio of equity to debt can be confusing, but if you evaluate the ROE and other economic factors you should be able to tell if the company is bringing money in or losing it.
Investment Tip #4 Room for Growth
Making sure the business has room for growth in its market is also important. A company that has little competition is preferable, but a company with a moderate amount of competition and a plan to be number one is ok as well. Just do your research.
When you are interested in investing in a company you need to take your time and evaluate the company, look over financial statements, talk to management and have all of your questions answered to your satisfaction. After all, it is your money and you aren’t going to give your money to just any company. So, be sure and confident in the company and have that backed up with proof and you will decrease your risk investing in a company.
SearchArticles.Net includes thousands of articles including tips and information on business, finance and investing. For more business, finance and investing articles, visit http://www.searcharticles.net/business-finance.cfm.
Tags: business, finance, financing, investing, investments, mutual funds, stocks
Q: What have been the most successful approaches to attracting direct foreign investments: offering prospective investors tax breaks and similar benefits, or improving the overall investment climate of the country?
Empirical research has demonstrated that investors are not lured by tax breaks and monetary or fiscal investment incentives. They will take advantage of existing schemes (and ask for more, pitting one country against another). But these will never be the determining factors in their decision making. They are much more likely to be swayed by the level of protection of property rights, degree of corruption, transparency, state of the physical infrastructure, education and knowledge of foreign languages and “mission critical skills”, geographical position and proximity to markets and culture and mentality.
Q: What have been successful techniques for countries to improve their previously negative investment image?
The politicians of the country need to be seen to be transparently, non-corruptly encouraging business, liberalizing and protecting the property rights of investors. One real, transparent (for instance through international tender) privatization; one case where the government supported a foreigner against a local; one politician severely punished for corruption and nepotism; one fearless news medium - change a country’s image.
Q: Should there be restrictions on repatriation of foreign investment capital (such restrictions could prevent an investment panic, but at the same time they negatively affect investor’s confidence)?
Short term and long term capital flows are two disparate phenomena with very little in common. The former is speculative and technical in nature and has very little to do with fundamental realities. The latter is investment oriented and committed to the increasing of the welfare and wealth of its new domicile. It is, therefore, wrong to talk about “global capital flows”. There are investments (including even long term portfolio investments and venture capital) - and there is speculative, “hot” money. While “hot money” is very useful as a lubricant on the wheels of liquid capital markets in rich countries - it can be destructive in less liquid, immature economies or in economies in transition.
The two phenomena should be accorded a different treatment. While long term capital flows should be completely liberalized, encouraged and welcomed - the short term, “hot money” type should be controlled and even discouraged. The introduction of fiscally-oriented capital controls (as Chile has implemented) is one possibility. The less attractive Malaysian model springs to mind. It is less attractive because it penalizes both the short term and the long term financial players. But it is clear that an important and integral part of the new International Financial Architecture MUST be the control of speculative money in pursuit of ever higher yields. There is nothing inherently wrong with high yields - but the capital markets provide yields connected to economic depression and to price collapses through the mechanism of short selling and through the usage of certain derivatives. This aspect of things must be neutered or at least countered.
Q: What approach has been most useful in best serving the needs of small businesses: through private business support firms, business associations, or by government agencies?
It depends where. In Israel (until the beginning of the 90s), South Korea and Japan (until 1997) - the state provided the necessary direction and support. In the USA - the private sector invented its own enormously successful support structures (such as venture capital funds). The right approach depends on the characteristics of the country in question: how entrepreneurial are its citizens, how accessible are credits and microcredits to SMEs, how benign are the bankruptcy laws (which always reflect a social ethos), how good is its physical infrastructure, how educated are its citizens and so on.
Q: How might collective action problems among numerous and dispersed small and medium entrepreneurs best be dealt with?
It is a strange question to ask in the age of cross-Atlantic transportation, telecommunication and computer networks (such as the Internet). Geographical dispersion is absolutely irrelevant. The problem is in the diverging self-interests of the various players. The more numerous they are, the more niche-orientated, the smaller - the lesser the common denominator. A proof of this fragmentation is the declining power of cartels - trade unions, on the one hand and business trusts, monopolies and cartels, on the other hand. The question is not whether this can be overcome but whether it SHOULD be overcome. Such diversity of interests is the lifeblood of the modern market economy which is based on conflicts and disagreements as much as it is based on the ability to ultimately compromise and reach a consensus.
What needs to be done centrally is public relations and education. People, politicians, big corporations need to be taught the value and advantages of small business, of entrepreneurship and intrapreneurship. And new ways to support this sector need to be constantly devised.
Q: How might access of small business to start-up capital and other resources best be facilitated?
The traditional banks all over the world failed at maintaining the balancing act between risk and reward. The result was a mega shift to the capital markets. Stock exchanges for trading the shares of small and technology companies sprang all over the world (NASDAQ in the USA, the former USM in London, the Neuemarkt in Germany and so on). Investment and venture capital funds became the second most important source quantitatively. They not only funded budding entrepreneurs but also coached them and saw them through the excruciating and dangerous research and development phases.
But these are rich world solutions.
An important development is the invention of “third world solutions” such as microcredits granted to the agrarian or textile sectors, mainly to women and which involve the whole community.
Q: Women start one-third of new businesses in the region: now can this contribution to economic growth be further stimulated?
By providing them with the conditions to work and exercise their entrepreneurial skills. By establishing day care centres for their children. By providing microcredits (women have proven to be inordinately reliable borrowers). By giving them tax credits. By allowing or encouraging flexitime or part time work or work from home. By recognizing the home as the domicile of business (especially through the appropriate tax laws). By equalizing their legal rights and their pay. By protecting them from sexual or gender harassment.
About The Author
Sam Vaknin is the author of “Malignant Self Love - Narcissism Revisited” and “After the Rain - How the West Lost the East”. He is a columnist in “Central Europe Review”, United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
His web site: http://samvak.tripod.com
Tags: business, capital flow, finance, foreign investmentA year or so ago my Mother-in-law had stopped by the house, when she came in she noticed the mail on the counter (as mother-in-laws can do ). She noted there was a stack of window envelopes with checks in the pile addressed to me. She remarked how it must be great to get checks in the mail instead of just bills and junk mail. “So what are you up to these days?” She knew my prior side business had failed a few years before and was wondering how I was earning my ’side’ money these days.
I told her I was building software and web databases for people on evenings and weekends. I remember her saying I was ‘one of those people’ - not in a bad way, just I was one of those people who had to always have something going. It’s true. I do like to have something going. In fact, I think everyone should. I told her that I think everyone should have at least one side business.
If you’ve never thought of starting a small business, I would encourage you to do some self-exploration and research into a side business you might enjoy running on evenings and weekends. I’ll get into how to find the right side business in future post. But you can still start thinking about it today.
I’d like to make a clear distinction between what I mean when I say a side business versus a small business. A side business is something you can do to occupy your nights and weekends, where a small business would likely take more of a time commitment (i.e. restaurant or storefront). A small business owner can have a side business.
Here are 4 good reasons consider starting a side business:
goal A side business gives you independence and self-esteem you normally can’t get working a 9-5 job.
Think of all the negatives that can occur while working for someone else. Employee benefit cutbacks, decreased raises, health plan changes, mileage and hotel red tape can all take an emotional toll on anyone who feels trapped in their job. A small business helps you free yourself from the trapped feeling because you always have a backup plan. You can think, “Hey if the worst happens and I lose my job, I can deal with it because I’ve got my side business to back me”.
Having a side business gives you self-confidence that other employees usually do not have. If your business is bringing in even a little money and covering some of your expenses, you will benefit. Fear of job loss or loss in benefits is no longer a big deal.
Managers and bosses who play on the fears of employees by threatening their livelihood if they don’t obey lose their power. Ironically, since you are playing a different game, the boss will normally promote you or transfer you. But make sure you consider your promotion offers carefully, so as not to destroy your side business.
goal A side business diversifies your investments
Every investment analyst you talk to recommends diversifying your investments. Why? Because one stock can always tank. If you are holding only one stock and it fails, then all of your money goes away with it.
The same is true with your work and your time investment. If you are working just a 9-5 job and using the employee 401k as your only investment strategy, I have one word for you: Enron. Sure, the job might be great now; you might be making a fortune but what if? What if 2 years from now the company fails or someone has their hand in the till? Most likely something like this won’t happen, but what if it does? Do you really want to grant someone else so much power?
Personally, I prefer to steer my own boat, control my own course - I don’t want someone else to have that much control over my life and future. That’s why a better plan is to create something that you alone manage.
goal A side business is a wise use of your free time
If you don’t have a side business, let me ask how do you spend your evenings, weekends and time off? Watching TV? Playing computer games? Sleeping? Drinking?
Don’t get me wrong, there is time for TV, fun and games. I have as much fun as the next guy. But I don’t spend every hour of my free time doing typical “free time” things. I look at my free time as both free and an investment. Considering it’s still my time, I can choose to play the whole time, work the whole time or split up the time between work and play. Personally, I choose to split up my time between the two.
Earl Nightingale in Lead the Field asked a great question. He added up all the time in the week where you are not working. (I am paraphrasing) “There is 168 hours in every week, 8736 hours in a year. The average worker works 40 hours a week or 2080 hours a year. That leaves 6656 hours of free time each year, when you subtract out a generous 8 hours of sleep each night, that leaves 3744 hours of free time each year where you can do whatever you want. But do we really need to dedicate that much time to leisure activities like watching TV and socializing?”
It’s a good point. If you dedicated half of that time towards your own side business, that would add up to being almost the same as having a full-time employee working for you if you counted time off for vacations.
goal A side business is a great education
Imagine yourself having the opportunity to learn about marketing, advertising, law, customer service, management, incorporation and much more without having to pay to go to a fancy business school or MBA program? Starting a side business is like a crash course in all of those subjects because you have to hit the ground running.
If you don’t learn about advertising and marketing you won’t have any customers. If you don’t learn anything about law, you could get sued or taxed into oblivion. Every day will be a new learning experience. And the more you learn the more you earn.
When you add up all the advantages of starting a side business, it becomes clear it’s worth the effort. Even if it fails or doesn’t replace your day job it still provides a great education. And what you learn in your side business can be applied to all of your future business dealings. So what are you waiting for?
Brad Isaac is the creator of Achieve-IT! Goal Setting software for Pocket PC. He has made human achievement and motivation a study for over 20 years. You can read his unique goal setting insights daily at the Achieve-IT! goal setting blog. Be sure to subscribe to his newsletter for even more great goal setting articles.
Tags: achievement, business, goal setting, money, success