Truth be told, the decision making process to invest in a business can really be daunting. Not only will you have to sieve out the right decision from your fears, biases and intuition, you would also have to deal with post-investment dissonance. You know, taking that huge risk to invest, maybe all your life savings in a business only because the business idea sounds fantastic. Well, Okay, to save you this stress, we have taken time to curate 5 signs or elements to look out for when next someone says “come and invest in my business”. These recommendations are not only useful to investors, they are also handy for entrepreneurs to do proper assignments before pitching.
- Business Differentiator- Thou shall not invest in a me too business
- Solid Business Plan is a must
- Registration Documents
- Number Forecast
- Strong Story is what consumers buy
- Invest when the Eagle-Eye view is available
Business Differentiator – Thou shall not invest in a me too business
Without mincing words, investing in some business idea is just a sheer waste of funds. The market is already saturated with so many products, don’t invest your money in a ‘me too’ business. Critically review the business idea, what’s new or innovative about the idea or product? What’s unique about it? What problem is it solving? Check if the “problem it is solving” is actually a problem.
What makes the product stand out? Is the market ready for the uniqueness of the product? Is it truly a new-innovation or a remodified innovation? We are not saying that a product must be a new invention, but that a product must have a competitive advantage. It is this advantage that will make it survive and be successful. A product can differentiate itself by being, for example, the most fuel-efficient car, if there has not been one in the market.
Solid Business Plan is a must before you invest in a business
It sometimes doesn’t take forever to identify a serious business. One of such easy ways is through a business plan. When someone says they have a business idea or they are into a particular business, ask them for their business plan. Not only does this show that they have given the whole idea a thought-through, it also shows their level of commitment to the idea. See a business plan as a roadmap, if you trade crypto, see it as a whitepaper. Check out our recent post on crypto investment.
A good business plan shows where the business is going to, projection of when it will get there, and how it will get there. A good business plan will contain information such as: target market data, marketing plans, sales channels, financial projection, competitors analysis, SWOT (strengths, weaknesses, opportunities and threats). Check how to write a business plan. A business plan is a must before you invest in a business!
Registration Documents
If you have been invited to invest in an established business, then it is proper to request to see the registration documents. However, this is not enough. You need to combine all the prescribed, at least to the level of conviction. A verifiable Nigerian business will for instance, have documents that includes but not limited to Corporate Affairs Registration, Tax Identification Number, Association registration. If it’s food, drugs, beverage, cosmetics or similar, it will have the National Agency for Food and Drug Administration and Control (NAFDAC) registration number.
Some other businesses require Standard Organisation of Nigeria (SON). All of these will prove that the business passed all the legal requirements and procedures, as stipulated by the government. You don’t want to invest in a business that didn’t do the right thing, and for that, getting heavily hit with legal actions. If the idea is very excellent but does not have all these documents, the entrepreneur must be able to inform you at least about which documents are needed on the spot.
Number Forecast – to invest in a business
Remember, you are an investor not a charity organisation. You are not donating your money for some charity cause or are you? You need solid data that shows your money will be made back with profit. If the business has not been up and running, then it must show: what’s expected to come in, when business will hit the targeted number, most importantly, when you as an investor can be expected to start earning your money back, with profit.
In short, you must be convinced that there is a strong finance plan. There should be a clear cut investment structure that shows percentage of ownership for a particular amount of cash. Say, invest 200,000,000 million to get 5% ownership. As an investor, you will have to negotiate what favours you here. Don’t forget to ascertain the exit plan.
a good business idea is problem solving,
has a good business plan and a strong story
Samuel Olawoyin
Strong Story is what consumers buy
The market as said earlier is saturated with so many products. It is only wise not to invest in a ‘me too’ business idea. Consumers are not robots, just like you are not too. If an idea has a great story to back it up, and it can convince you, it is likely to convince the consumers too. Consumers buy experience/story around a product, not majorly the functional feature of the product.
Think of story/narrative as what the consumer will tell their friends about a product, how they will describe it. In that case, someone asking you to invest should be able to tell; where the idea came from, and where it’s aiming at. What needs to be met? How will it change the world? Why should consumers abandon product A to pick yours?.
Invest when the Eagle-Eye view is available
The eagle-eye view is that which flies high above the landscape and sees far beyond what is for now. Where should the business head towards? What are the opportunities sto scale? How will the business develop? What vision does the business have? We will explore the eagle-eye view in more depth in other contents as it is so crucial before you invest in a business.
To sum it all up, a good business idea is problem solving. They have a good business plan and a strong story to push it’s solution out.
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- business education that is relevant to our global economy,
- data information to guide you and
- a community of both international partners/investors and Nigerian entrepreneurs.
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Thank you for reading to the end.
Cheers
Joadre Editorial
