Tuesday December 5, 2023

Two Common and Preventable Mistakes Investors Make

Diligence is the mother of good luck

- Benjamin Franklin

There are two simple things that can be done to reduce risk and enhance returns that investors often overlook.

Many investors try and find the next great deal.  The half empty glass viewpoint is that over 40% of Small and Medium sized businesses (SMEs) don’t make money. However, there are many innovative and great companies to invest in.
For real estate we hear location, location, location.  For investing in SMEs, it should be due diligence, due diligence, due diligence. Most unsuccessful business investments can be traced back to two simple things, the quality of due diligence upfront and ongoing.

Upfront we think about such things as management, product, branding, position, price, margins, costs, overheads etc. Add to that investor returns and exit strategies etc. Do your due diligence well and without emotional attachment. One of the greatest risks and pitfalls for investors and business owners is falling in love with the business and overlooking, dismissing or rationalizing away risks and opportunities. That is why we recommend do your own homework, but also get professional and independent help.

When buying a great car you do your homework and then rely upon a preventative maintenance program. You wouldn’t spend $200,000 on a car and then not change the oil. Why would your business investment be any different? Most investors don’t have the time, skills or objectivity to perform proper and proactive ongoing due diligence. An ongoing due diligence program will help protect and enhance your investment. It can help ensure that the great business plan that you invested in is on track.  It can add value to the management and the business.

Imagine your investment returns if you could avoid just one costly mistake.

Do your due diligence, upfront and ongoing and use professional, objective expertise to help you.

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