5 Investing Tips For The Amateur Entrepreneur

Piggy Bank

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Last Updated on March 11, 2018 by Work In My Pajamas

Piggy Bank

Entrepreneurs should keep several pieces of advice in mind. Spending is not synonymous with investing; watch for wasteful spending. While it is tempting to play it safe, entrepreneurship entails risk. After due diligence and research, taking chances on less-than-perfect customers or clients could pay off handsomely. Keep some, but not too much, cash on hand to cover short-term obligations. Accept the fact that people do not blindly follow economic laws as objects follow laws of physics. Lastly, know when to walk away from a bad investment.

5 Investing Tips For The Amateur Entrepreneur

    1. Spend based on analysis, not fads

Arguably the most famous class of such unnecessary spending is paying for “secrets for success”-themed materials. Whatever advantage there would have been gained from truly secretive and profitable information dissipates when the competition knows as much about it as you. Publications such as Investopedia, The Motley Fool and MIT’s Open Courseware all have many articles, lecture notes, tests and recommended readings on entrepreneurship and investing.

    1. Risky customers can be advantageous

Watch for potential customers who enlist the services of credit repair companies. Bad credit is not always indicative of a lack of fiscal responsibility. Divorce, medical and legal expenses can take a toll on responsible people that are simply struck by bad circumstances. Credit repair is a goal for which customers are likely to accept higher rates or charges. As such, this demographic will very likely translate into higher profit margins for the savvy entrepreneur.

    1. Maintain short-term liquidity

Unexpected costs may spiral out of control if debt is required to finance those costs in the short term. Similarly, investment opportunities may not last long. Having some cash and liquid cash-equivalent assets is prudent for an entrepreneur.

    1. Customers and clients are not strictly rational

Meditate on the following axiom of the business world: People prefer to do business with friends, even if, objectively speaking, they should seek out other, non-friendly business partners. A powerful social element is almost always involved in entrepreneurship. Entrepreneurs with backgrounds in rigorous fields like science and technical specialties sometimes stumble here. An exclusively logical approach serves well when dealing with the physical world. For better or worse, the same can’t be said for the human world.

    1. Cut your losses

Investments do not always go as planned. People sometimes have an urge to “wait out” a bad investment, hoping it will bounce back to profitability. Cutting losses may be the best an entrepreneur can do; “waiting it out” may only deepen the loss.

2 thoughts on “5 Investing Tips For The Amateur Entrepreneur”

  1. I made so many mistake starting out that I might not have made if I had read some of your articles first. When I first came onto the entrepreneurial scene and started a web start-up, there was such a hail storm of confusing and conflicting information on how to get started and I just did everything all wrong. I invested in what I didn’t realize at the time were just fads, didn’t understand how to test what was working and what didn’t, and I spent money I simply didn’t have. The result of all this? I not only did not profit, I lost. But I’m happy to say that since then I’ve learned a lot and am doing much better now. =)

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