Much is said about investing in a business and the benefits it represents for your wealth. But let’s talk now about how to invest wisely.
Protect your wealth and invest based on strategies, defined objectives, and clear scenarios, not luck. After all, a business that is not profitable is not a business. Do not discover the low profitability of your investments when it is too late.
Choosing to invest in a business makes the main difference
How would you respond if someone asked you to keep your money in a box without a key and leave it unsupervised in a public square? You most likely refuse to do it, right? Nobody likes to lose money or take immediate risks. The objective of any business or investment is to grow your money.
Profitability, in straightforward terms, is the difference between the money invested and the money generated. It would be best if you learned to calculate this variable to anticipate risks, measure objectives, and achieve goals.
Investing in a business means something much broader than opening a store or offering a service. Expanding the landscape opens up possibilities. The idea that you must be a millionaire to invest in a business has been left behind. Today, it is possible to invest even with little money.
In any case, regardless of whether it is your first investment project or if you are already an expert, you should always pay special attention to profitability.
How do we know if it is a profitable business?
We know that investing in a business always generates some fear and doubts. It doesn’t matter how many times you are told something is going to work or how many successful investor stories you have read.
Solid fundamentals and hard evidence will give you added peace of mind and security when investing.
Investing in a business: What should I take into account?
One of the most common mistakes some investors make is looking only at the starting amount and your purchasing power. However, the profitability of any investment is affected positively or negatively by various factors below; know the most important factors:
Business Volume
It is considered one of the most important indicators for measuring the dimensions of a profitable business. To know what your company’s benefits will be, you must consider both your income and all costs.
Calculation of Benefits Without Expenses
When considering investing in a business, it may be of interest to you and of great use that you calculate the benefits without subtracting the interest, amortization, and expenses associated with taxes. This value is also known as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Investment cost
Some sites and sources refer to investment costs as pre-operating expenses. In short, they are all the expenses you must cover to start the business.
This ranges from the conception of the idea to the acquisition of assets and the stage before the creation of your first product or service.
Financial debt
One of the most practical ways to make capital to invest is through financing and credits. Financial debt is a debt contracted with a financial entity or issued by a company in the financial market. It is made up of fixed-cost and variable-cost components.
Cash flow
The cash flow applies to companies and businesses where the inflows and outflows of money can be counted in all their accounting boxes.
It will give you enough information to understand the income and expenses and thus to invest wisely in a business.
