I am excited about todays post because I feel I am able to provide you with personal insight as well as professional tactical approaches on how to invest time and money.
Someone approaches you to make an investment into their company what do you do? First thing I would look at is the person who approached you. What is his/her background? Where do they come from? What experience do they have?
Why does this matter? This matters because you are investing in people, business comes second. People make up the business, are what will make that business either successful or a failure. Without people you have no business, you have no clients, you have nothing except for an Idea.
David Usher in his creative book Let the Elephants Run unlock your creativity and change everything, highlights a scale for ideas versus execution. A brilliant idea is worth 20 points while a great execution is worth 1,000,000$. So a brilliant idea with a great execution you have a potential to scale to 20,000,000$ according to David’s chart.
Execution is everything and you have heard me say this before and I will continue to influence you to make sure you understand that an Idea is worth nothing. Even with a poor execution you are able to bring that idea and turn it into a reality.
Whatever you do, do not invest your time and/or your money into an idea. It is a huge waste and I have found this out the hard way unfortunately. An individual approached me and asked me to invest money into this tech company, showing me some handsome returns, and so I did. What did that do for me? 0.
If you are only investing your money into something what does that mean? Let me explain, investing money into something means you have put in your time somewhere else to get that money.
What is your time worth to you? At the end of the day it is always your time that is invested, unless you come from a rich family background and that money was handed to you or your brokering someone else’s cash, which you still should treat as your own because someone else has invested their time into earning that cash flow.
Before we get off topic here, let’s go back to investing into people. You have found someone who is audacious, courage’s, and determined to make this business work, what’s next? Getting past this stage is very important, once you do, have a look at what their proposal is.
Does the proposal make sense to you? Do you understand the business? Do you understand the market? Is there anyone else involved in their business? Take a look at the organizational chart as well as everyone’s CV in detail (what each and every person does, their experience and qualifications).
Something I left out and before we move on is, how well knowledgeable is the person in the business, more importantly in the market in which he/she wants you to invest in?
Walk away from this if they have no idea where their target markets are, how to attain the markets attention, and what the best tools for marketing are that will convert leads into actual sales.
Why do I emphasize the market more than the actual business itself? This is because without understanding the market, your business is basically a store with inventory, that’s it.
The best case scenario and this is rare to come by, people who are looking for investors should especially pay attention to what I am about to say next.
The business is operational, it has a defined market, people are wanting to buy more but the business cannot handle the capacity.
I would say two things to the business owner. One, take that profit and reinvest it all to scale the business. Two, I would like to invest.
The business must have a proven concept and a market ready to buy “now”, not just an idea on a napkin, by the way, and I will cover this later in the post, business plans don’t mean shit.
The best thing you can do is not investing into something you do not understand. If you are really interested in the investment, then educate yourself enough to understand what to pay attention to and why things work the way they do.
You could potentially bring a new insight that the person who is asking you to invest could not have seen. Most times that person has their blinders on. They have their blinders on because there too focused on what’s in front, the product/service, rather than taking an outside view of their business.
That’s okay for them to be super focused, it’s equally as important for them to educate you on what the business is. To teach you things you don’t know, this shows a level of understanding.
The things that investors/myself would look for in a business are; Who is behind the business? Who are the current investors (if there is any)? Do you have a proven working model of the business? Is the market ready to buy? If so, do you have pending real orders? What is the profit margins on the product/service? If you truly believe in your business, why aren’t you taking a loan out and doing it yourself?
There are more technical questions however, I feel these general questions are most important before even taking it to the technical level.
Things investors/myself are not looking for; Ideas.
How about using someone else’s cash, besides a bank loan, to make and investment with? You are then considered a broker and I want to cover this in another post because I can give you some personal experience with this. What to look for and how to leverage both parties. I can also give you insight as to what a traditional bank will look for when asking for a loan for an investment.
As you can tell I get fired up about this topic because I believe this is where my passion lies. I have created my own marketing/financing business with my best friend who is now my partner in K.V. Business solutions. Providing solutions for aspiring entrepreneurs. Meaning we do not just hand out expert knowledge and money we actually partner up and make sure that business is thriving.
It becomes our best interest for any business we partner up with to do well, why? Because it becomes our business.
The best piece of advice I can offer you is to “pay attention”. Pay attention to the person who is bringing you a potential investment, pay attention to their characteristics, to their knowledge, to what they say and how they are doing things. Ask yourself, are they paying attention to the market? How has the market responded to the business? How would they be able to handle a good problem (Expansion, more clients/more employees)?
Ultimately it becomes the person’s decision who brought this business to you after you accept their proposal. When you show them how well versed you are in investing, they will take a second look at you and will maybe reconsider their offer.
Fear is what drives people away.
The point is not for you to make them scared of you, but for them to take your time and your money very seriously. You are after their execution not their idea.
Okay, so the person who wants you to invest draws up a really neat business plan. Two things to look at here. Has the business been operational? If so is this a conservative business plan? And what is the plan of achieving what is laid out in the business plan? Has this plan worked in the past? If so how effectively?
Hope you are still paying attention and I am not boring you. My apologize if this is too deep.
Scenario two, the person has a business plan but has not implemented anything nor has a proven business that actually generates profit. In my experience that business plan is as good as the blank canvas that I began writing this post with. Business plans are useless if they actually have not gone out an proven that first, there is a market wanting to buy now, second that the actions to get to the market work.
Never make a rash decision on anything you do. Especially when it comes to investing. You may get hyped up and emotionally involved and this is the worst possible case scenario.
I did that with one of my current businesses. I rushed in a bought a commercial drone that the company has no use for. At the time I thought this was the basis of the company. I did not do any homework on it, did not have any clients ready to buy. Just on an idea that this was going to work. A year later that commercial drone has made it as far as my storage locker. It serves more of a purpose being laid out in the parts that took to piece it together.
Take notice in this post that I did not mention any expert articles, other sources, and the book I mentioned was on creativity which has nothing to do with business. This isn’t because I am lazy and I didn’t want to take the time to do so. It is because I feel I know this stuff and of course I am paying attention every day, every business meeting I have with other employees in companies or C executives.
It always serves a purpose to be creative even when it comes down to investments.
Is this a post about investing in a sure thing? It may seem that way. However, speaking from experience, do your due diligence. Reread this post if you need to understand what to look for before making an investment.
What I didn’t talk about was the types of markets there are. Yes, there are a few, for example, niche markets, super niche markets, general markets. Which approach is best to enter into those markets, the best method of execution?
I am not a know it all guy, I know this may contradict with my last paragraph. I am a student. I always will be no matter what. There is so much to learn, and the best/hardest place to learn is from my mistakes unfortunately.
Thank you for reading the things I understand and really enjoy in my life. In a future post I would like to get into the mindset behind investments. I feel it is an important subject to cover and I will lose your attention if we begin to cover it now. To be continued….
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