Investment Basics for New Business-owners: The Path to Long-term Success

More than 5 years have passed since the Great Recession, which has undoubtedly changed the financial and economic landscape beyond all recognition. Nowhere is this impact more noticeable than in the world of business and entrepreneurship, where individuals are far more opportunistic and able to establish a number of innovative, low cost start-ups. The development of an idea is just the beginning of a long and often arduous commercial journey, which requires business-owners to constantly develop strategies and pay attention to even the smallest of details.

Path to success

Investment for Beginners: How to Create a Profitable Business Model

With this in mind, what practical steps can inexperienced entrepreneurs take to develop a successful and profitable business model? Consider the following:

1. Understand the Purpose of Investment

While this may seem obvious, it is extremely important to understand the purpose of every single commercial investment that you make. Whether you are filing a patent application for a specific product or purchasing stock to fulfil orders, it is crucial that you have considered the type of return that you require and its value.

As a business-owner you will never make an investment purely for the sake of spending money, as there must always be a clearly defined goal that can have a positive impact on your venture. By adopting a detailed approach to each individual business investment, you can maximise both financial profit and the use of human capital over time.

2. Manage and Minimise Costs

In the quest for a return, it is important not to lose sight of costs and the impact that they have on bottom line profit margins. Essentially, every investment will require you to make an initial financial commitment, which must be spent wisely in order to generate the best possible return.

In instances where you invest a higher initial sum, you must be aware that the financial return needs to rise proportionately if you are to maximise profit. As a general rule, remember that an inflated level of return or annual turnover cannot be translated into profitability unless you have carefully managed your costs and reduced them where possible.

3. Identify the Most Accurate Profit Figures

On an interesting note, the way in which you analyse and report profit can also vary depending on your outlook. This can have a direct impact on how you appraise the performance of your business, which may in turn encourage you to develop a false sense of security concerning the wisdom of your investment.

There are a number of core figures that you should pay particular attention to if you are to gain an accurate insight into the growth and performance of your business, with gross profit, operating profit and their correlation with the previous years’ figures. This can be particularly informative when aligned with a defined bottom line profit.