Investing as a Business


Can investing be the proverbial goose that lays the golden egg? Yes, it is possible to build a large net worth through investing i.e. disciplined purchase of assets available at a substantial discount to their intrinsic value. There is nothing as rewarding as owning a good business for the long term and seeing it grow in leaps and bounds. The legendary investor Warren Buffett summed up this sentiment succinctly at the 1996 Berkshire Hathaway meeting in saying, “If you find three wonderful businesses in your life, you’ll get very rich.” The universe of investment opportunities is truly vast and the search for the golden goose may seem daunting to the uninitiated. But it is not an impossible task for someone who familiarizes himself with different business investment types and firms up investment strategies.

The simplest route to acquiring ownership in an existing company is by purchasing equity in the company. For example, a person who buys 10,000 shares in a company that has 100,000 outstanding shares effectively owns 10% of the company. If the same individual increases his stake in excess of 50%, he would become a majority owner and attain total control over the company’s operations.

Fine wine trading and investing is of recent origins and yet constitutes one of the best performing asset classes in the last 2 decades. As it has become customary for exotic wines to go under the hammer even at a Sotheby’s auction, investing in high-end wines could be a lucrative business opportunity and a path to a luxurious early retirement.

Fine wines are among the most profitable investment assets. Demand for investing in them is growing significantly. However, current fine wine trading platforms are complicated and have high processing fees.

The CWEX exchange aims to establish easy to access and easy to use fine wine trading platform.

Crypto Wine Exchange Hong Kong (CWEX), in partnership with the Swiss-based company DotChain GmbH Switzerland, will guarantee investment anonymity and security through a blockchain-based ownership certification system; any traded fine wine bottle will be provided with a unique certificate of authenticity to be issued on the blockchain.

A debt investment is a loan of sorts. Businesses borrow from investors at a pre-determined rate of interest in order to fulfill their capex (or capacity expansion) requirements. Unlike an equity investor, a debt investor does not own direct equity in a company. Just like any loaner, a debt investor receives regular installment payments and will get the original principal amount at the time of maturity of the loan. And in the event of a company going bankrupt, the debt investors enjoy a primary claim over the balance assets of the failing company.

An investment partnership is a group of investors that pools its money into a company. Each partner shares in the company’s profits and losses to the extent of his personal share. A person can choose to either be a general partner who oversees the partnership and determines how the investments are utilized, or a limited partner.

Angel investors are individuals who typically invest at an early stage of a start-up. They provide seed capital up to $100,000 and receive shares in return of their investment. Investing in startups can be as profitable as actually running them.

Venture capitalists follow in the footsteps of the angel investors. Publicly traded venture capital funds scout and invest in startups with the hope of gaining access to a diverse portfolio of businesses and reaping a huge bonanza when the company goes public.

Both angel investments and venture capital investments are inherently risky propositions as failures far outnumber the success stories. People desirous of taking this business investment route should do due diligence of the target companies, have huge pockets, be in the game for the long haul and have an effective exit strategy.

Anyone intending to invest in a well-established business can take up a franchise by paying a relatively nominal franchise fee and adhering to the rules of the parent company. For example, a person who buys a franchise of McDonald’s stands to gain immensely from brand recognition associated with the famed fast-food brand.

What are the vision and values of the company management? Does the company’s top brass possess a strong understanding of the business model, industry environment and broader economy? Such insights can only be gleaned from a face-to-face conversation with the CEO and not a mere reading of a company’s well-orchestrated reports. Growth is at the heart of every business enterprise. Successful businesses are led by leaders who care deeply about growing their businesses and know that execution of plans is as important as vision.

A prospective investor should understand the company culture as it is an integral part of business. It encompasses the values, practices and beliefs shared by members of the organization. A positive culture provides a strong R.O.I in the long-run due to heightened motivation levels, high happiness quotient and a deep commitment on the part of the employees.

An investor should keep a keen eye on the company’s existing growth, future growth projections and mode of growth. Organic growth i.e. growing from within is far more crucial for a company than inorganic growth viz. growing through mergers and acquisitions. Key financial statements, including the balance sheet and cash-flow statement also provide crucial insights into where a company is and where it is headed.

Coca-Cola is the undisputed leader in the soft drink industry, Johnson & Johnson is unrivalled in the healthcare space and Walmart is the superstar of retail as they possess advantages that cannot be replicated by their competitors. For example, Walmart has tasted phenomenal success because its competitive advantage of low transportation costs have led to higher profits and reduced prices for the consumers.

Scalability is a key ingredient that makes a business successful within a single generation. For example, Walmart, McDonald’s and Coca-Cola are global giants today because they could rapidly replicate their products and services across their home country and the world over.

The customer is indeed the king; he makes the buying decisions and uses a company’s products and services. Talking to the customers provides a first-hand understanding of how a company and its products are faring in the marketplace and the competitive environment.

To end, the odds are stacked against you if you put all your eggs in one investment basket. Wisdom dictates that one should invest in different companies and deploy time-tested investment strategies for the long term.

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