Each and every small business owner makes decisions daily. Business decisions may be as simple as who on your team is taking the client out for lunch or as complex as developing a marketing strategy or making a business investment. Many small business owners appoint a good financial advisor or an investment manager to make all their investment decisions. A good investment manager should have the following qualities:
- A proven track record as a start-up/established small business investor.
- They should possess ample experience and relevant market knowledge.
- A good network of contacts that can and will deliver market access and further investment for entrepreneurs.
- They should know how to secure suitable protections and rights for the investors in case of calamities.
Tips to Evaluate Business Investment
As a small business owner, it is mandatory that you evaluate the results of your business investments. You can determine whether a particular investment has worked wonders for your business by calculating the return on investment. Here are a few tips that will help you evaluate business investment.
- Add up the business investment costs. For instance, if you have placed an advertisement that is also an investment, you need to include the cost of designing and submission in your total cost of investment.
- Identify the profit made from a particular investment. Though it can be difficult it is not impossible. If you have placed an ad in the local newspapers or through any of the social media channels, you can directly ask customers who call for enquiries where they heard about your business. Another idea is to direct your potential customers to a specific phone number or specific website to track the source of sales.
- To get the percentage on return on investment (ROI), you should subtract your business investment cost from the total sales and divide that amount by the total cost. This will give you the ROI. To get the ROI percentage multiple the ROI by 100.
- Evaluation of the ROI percentage will help you decide whether you have made a smart business investment or not.
Tips for Managing your Business’s Investment Portfolio
- Business investment decisions should be made keeping in mind the future – Build an investment portfolio different from your business. As a business person, you need to decide how to divide your assets and individual investments. Discuss it with your family. When you are making a business investment, make sure to have a clear short term and long term plan in mind. You need to decide whether the returns are enough to meet your lifestyle needs.
- Do not make an investment in the same industry as your business – As a business owner, most of your assets and funds would be tied up in your company. Therefore, your approach to investment should be different from those who do not own an enterprise. If your investments are in the same industry as your business and there is a slowdown, you will incur a loss.
- Invest in what you understand – This bit of advice was given by Warren Buffet to all business men. The investment opportunity might seem to be the cool thing to do, but if you have no understanding of how it works, then steer clear of it.
- Take full responsibility of your business investment decisions – Whether it is a personal or business investment, take full responsibility of your decisions in case of success or failure.
Every small business owner should evaluate their business investments periodically. This will help decide whether to invest more or recuperate the costs incurred. Periodical evaluation also helps you set clear goals for the future advancement of your business.
Flickr image by lumaxart
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