BPW International Blog
5 Questions You Need to Ask Yourself Before Making a Business Investment
A business investment offers both entrepreneurs and investors excellent opportunities to get the best returns. It’s important, however, to take a closer look at different investment options to find out what is really helping your business grow and generate more revenue. As such, you need to ask yourself a few questions to ensure you make decisions that pay off in the future.
Are Women Good Investors?
When it comes to finances, we recognise the fact that gender stereotypes exist in every society. Research carried out by Merrill Lynch reveals that gender differences between male and female investors are generally overstated. More than 80% of women investors who participated in the study believed that they could adjust their lifestyles to meet their investment goals. The research suggests that men and women are quite similar in their investing views and habits. When gender differences do arise, they are largely shaped by geographic and demographic factors and not by innate characteristics alone.
One thing is for certain though: Women do tend to ask more questions in comparison to men, but not because they don’t understand investments. They do it in order to get a clear understanding of the purpose of investment strategies. These questions work to their advantage and enable them to make wiser decisions. Let’s now discuss a few pertinent questions you need to ask yourself before making a business investment.
1. Do I Have a Thorough Understanding of How This Works?
Even the most promising investment strategies face ups and downs. If you gain a complete understanding of how it works, you’re more likely to stick to your plan even when you experience big down periods. You should have an almost religious like belief to know that things will turn around in your favour despite the temporary problems you’re facing. This will only happen when you do your best to completely understand why you’re investing in something and how it’s supposed to work.
If you fail to ask yourself this question, you may overlook a few things and have second thoughts the moment you hit a few roadblocks along the way.
2. Can I Afford This Investment?
No matter how promising any investment opportunity sounds, you need to make sure you have sufficient funds to cover your expenses, so you won’t have to disrupt or liquidate your investment prematurely. If you fail to take a closer look at your financial circumstances, you might end up putting aside money for a long-term investment without having anything to fall back on during unforeseen emergencies.
There are different financing options available to you if ever you’re short on money but are convinced that making an investment as soon as possible is the best course of action for your business. You could look at bank loans or seek the help of venture capitalists. Of course, careful thought must be given to the decision-making process; getting advice from fellow professionals or financial advisors before making the move is also wise.
3. Does This Investment Help Me Diversify Across My Portfolio?
You ought to spread your money between different investment products to mitigate your risks. Pick your investments wisely, so they work together to reach your financial goals. It’s good to have a mix of investments, so they don’t run into losses all at once. Consider your investment risks and find out how they might impact your personal circumstances.
Look up a risk profile questionnaire like this one to evaluate your risk profile. Doing so will help you determine if it’s all worth it or if the risks, sadly, far outweigh the benefits. Again, it’s all about making a wiser decision through asking the right questions, and knowing the answers to these questions.
4. Is This Investment in Line with My Priorities?
Before you put aside that large sum of money for an investment, take a good look at your top priorities. If you don’t ask yourself this question, you might end up regretting the decision you made. Will this investment help me achieve my business goals? Are there major risks involved that may jeopardise my business in the future? Are my objectives and plans for this investment beneficial to my business’ aims? Remember that an investment must not be made on a whim; it also must have value that’s relatable to your business.
5. How easy is it to get Out of It?
Despite having favourable market projections and positive past performances, investments can still go bad. Determine whether you’re at risk of losing all your money if things do go wrong. Some investments carry higher risks than others. Weigh the pros and cons and establish a good exit strategy, so you know what to do when times get tough.
By asking yourself these questions, you’re setting yourself up for having a wise investment. As a businesswoman, it also pays to keep tabs on your daily spending, needs, and wants, both for you and your business. Pick up a few tips on becoming a successful saver, so you achieve your financial goals faster and make investments easier and with less pressure.
You could also seek the help of fellow business and professional women when it comes to making the right business investment. BPW offer mentorship, networking, and skill-building programs that will guide you into making wise investments, and other important business decisions.