How to Decide If a Potential Business Investment is Worth It

by Josh Biggs in Business on 1st July 2021

When you are running a business, you often need to consider making investments in order to overcome problems and eventually lead to long-term profit. As the old saying goes, sometimes you need to spend money to make money!

However, working out if a potential investment is wise can be tricky. Whether you are considering investing in a simple Facebook ad or an autonomous forklift robot for your manufacturing business, there are few things to consider.

What Goals Could the Investment Help You Achieve?

The first step towards working out whether or not a potential business investment is actually worth it is working out what specific goal or goals you are trying to achieve with the investment. For example, your goal could be to reduce time spent on a certain business task (e.g., admin) to enable more time to be spent on more fruitful tasks. Your goal could also be to increase your business profits by a particular percentage over a particular time frame.

When setting a goal, using the SMART system can be very useful. SMART is an acronym—Specific, Measurable, Achievable, Realistic, and Timely. Setting goals that follow all of these is much more beneficial than goals that are vaguer.

Is There Another Way to Achieve These Goals?

Once you have set your goals, you should consider whether or not making this investment is the only way that you can realistically achieve them. For example, if you are considering paying to advertise on a billboard, consider whether or not this would really have an advantage over simply setting up free accounts and placing free ads on social media sites like Facebook.

It may be the case that it is possible to achieve your goals in other ways, but that the time saved by investing in a solution can make it worthwhile. For example, you may be able to spend time and effort learning marketing techniques and building a marketing strategy yourself, but if your time is valuable and better spent on actually carrying out business operations, then outsourcing this to a marketing company may be better for you. 

What ROI Are You Expecting? 

Even if your goal is not directly to make a particular profit, every business decision is in some way connected to the eventual goal of increasing or maintaining profits. This is why you should consider what specific and measurable ROI—or Return on Investment—you are aiming for. 

If the ROI you have in mind is unrealistic, your investment may not be a wise choice. On the other hand, if you are only expecting a very small ROI, there may be easier and cheaper ways of achieving this increase in profit.

Check Reviews and Testimonials

Once you have set your goals, worked out your projected ROI, and determined that this investment is a good way to achieve your goals, you need to make sure that the product or service you are investing in can actually deliver. Never purchase anything expensive without checking reviews and testimonials from buyers first!

Categories: Business