The role of effective investment in business scaling
An investment is an asset entered into the economic circuit today, in order to generate future income. In an economic sense, an investment is the purchase of goods that are not consumed at the moment, yet are used in the future to create profit. In finance, an investment is a monetary asset acquired with the idea that the asset will provide income in the future or will later be sold at a higher price to get a profit.
As an entrepreneur you already are an investor, and when setting up your business you have invested capital, financial resources, means of production to set the income-bearing business in the future. The investment is a risky, assumed activity, which is expected to bring positive effects.
The status of an investor does not end in the early stages of setting up a business, since you are constantly involved in the ongoing investment process (changes, upgrades, remodeling, etc.) throughout the life of your business, as it is important to develop dynamically and provide your business with scalability and a level of financial results multiplication.
Measuring and comparing such indicators as: investment volume, average annual net profit, investment recovery period, critical point, etc. – are only the basic ones that need to be taken into account in order to minimize the potential risks.
The indicators you need to analyze before investing in your business
It is very important initially to estimate as accurately as possible the actual volume of investments needed to successfully carry out the investment project. A more difficult thing is to quantify as accurately as possible the future profits generated, determined as realistically as possible, including with some reservations. The forecasting of financial results over time, including the consideration of the time factor are the key elements to make a rational, correct, efficient investment decision, which correlates to the potential risks of the existing business or a new business.
Determining the feasibility of an investment involves calculating a set of indicators. In addition to this, the ability to choose between two and more reasonable investment projects is one of the valuable skills for an investment entrepreneur or analyst. Is it better to invest in an item with a higher present value or a shorter payback period? How do you calculate the internal rate of return and how do you compare it? These are the questions with the right and appropriate answers to which ensure your success and help you minimize your risks.
Financial management consulting and training, business plan development and other services offered by Vioser company aim to implement indicators that will be your benchmark in making investment decisions, as well as finding effective solutions for your existing and future business so that you can invest as efficient as possible, with minimal risks and maximum profitability.
How do you make the final decision to invest or not in certain aspects of the company?
The decision to invest or, on the contrary, to abandon the investment project must be one based on reasoning rather than a purely emotional instinct. Only correctly calculated numbers and indicators can guide you in making a fair and optimal decision.
It is important that your investment, and your business in general, be forecasted over the life of the investment, taking into account the following factors: inflation rate, exchange rate, discount rate of future cash flows, and the forecasted and simulated scenario should be more “pessimistic” than “optimistic.”
Choosing the optimal investment project, determining the payback time and the critical point are the indicators that lead you to the right decision.
We, the Vioser team, as trainers and consultants are ready to guide you and offer you investment advice to ensure a profitable, sustainable and continuously growing business.
