Much is said about the importance of investing in a business and the great 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
What 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 very simple terms, is the difference between the money invested and the money generated. You must learn to calculate this variable to anticipate risks, measure objectives, and achieve goals.
When we talk about investing in a business, we mean something much broader than opening a store or offering a service. Expanding the landscape opens up possibilities. The idea that you need to 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 to know if it is a profitable business?
We know it, 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.
Your added peace of mind and security when it comes to investing will come from solid fundamentals and hard evidence.
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 to measure the dimensions of a profitable business. To know what the benefits of your company will be, you must consider both your income and all costs.
Calculation of Benefits Without Expenses
When thinking about investing in a business, it may be of your interest 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 that you will have to cover to start the business.
This ranges from the conception of the idea, 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 financing and credits. Financial debt is that contracted with a financial entity or that which was issued by a company in the financial market. It is made up of fixed cost and variable cost.
Cash flow
The cash flow applies to companies and businesses in which the inflows and outflows of money can be counted in all their accounting boxes.
It will give you enough information to know the income and expenses and thus be able to invest in a business wisely.
