Manage Business Strategy Like an Investment, Not Like ATM: Build Value, Create Wealth, Grow Assets, Make Investments…

Manage your business like a prudent investment and it will pay large dividends, or treat your business like an open ATM (automatic teller machine) and it can cost you– big time, like a faulty cash dispenser. Believe in your business enough to invest in it: Invest money, invest time, and invest resources… a real business must be based on a prudent investment plan with an expected return for the investment.

Business success does not just magically happen; you must have skin in the game, and you must be fully committed to making the business work– make it a real business by applying the mind-set of an investor.

According to Chia-Li Chien; managing a business must be viewed as more than a means for just improving your lifestyle; it must be viewed as an assemblage of investment assets that are used for generating wealth and serving the community… When the business is viewed from an  investor’s perspective, then you will actually expect and demand an annual investment return, as well as, growth and appreciation in the value of the business, over time. Let me elaborate, for example; managing a business can be viewed as a job (e.g., pay the mortgage…) or for improving lifestyle (e.g., vacation in Fuji…) or for the creation of wealth (e.g., establish an endowment fund…).

According to Jason Fisher and Eric Goldstein; if you’re looking to build a multi-million dollar business, then you must start treating the business like an investment– and start, right Now! And, if you don’t do it, right Now! Then it won’t ever happen… Treat your business like an investment, and it will pay you a generous return for your investment, as well as, growth in equity value and wealth… Prudent investments– financial instruments– are structured and managed for financial growth and income, and similarly, for a business to be successful– productive and effective– it must be structure and managed for growth and income, and a generous return for your investment…

But, most important,  business investments must be transparent– you must know what’s working and what’s not working, and the only way you can do that is by tracking results. And, tracking results is like looking in the mirror; where results are reflection of the investments and if afraid or unwilling to make prudent investments, then you must rethink the objectives and goals for the business…

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In the article How to Run Your Business Like an Investment by Michael Batton Kaput writes: The investors with the most staying power treat their stock portfolios with reverence. They know their investing philosophy that prizes long-term growth over short-term profits, and partners with others to get the most out of their money.

Business management could learn a lot from successful stock market players. Treating a business like an investment, rather than like a money-making tool that’s discarded after it has outlived its usefulness… managing a business like an investment can generate long-term returns and financial security for all the stakeholders. Consider these steps:

  • Step 1: Put yourself on the line. Any investment you make has material consequences for you and your net worth. With your own money on the line, you tend to take investing seriously. The same goes for a business. A substantial portion of your own assets and net worth should be tied to your business.  That gives you a stake in succeeding, as opposed to cashing in quickly and hanging your employees out to dry.
  • Step 2: Create a strategy for tough times. Too many businesses are blindsided when bad economic times or tough markets rear their heads. Financial investors, however, try to plan for the worst by hedging their risk and having plans in place to deal with difficult economic conditions. Businesses should do the same. While material success is the goal, it doesn’t always come easy. Draft strategies that the business will use to survive, and even capitalize, on tough times.
  • Step 3: Establish and maintain trust with your employees. Treating a business as an investment means treating your employees like one, too. Retaining workers and keeping them happy leads to better productivity and results. Avoid micromanagement where possible. Give employees the training and the tools to make decisions for themselves. Autonomy in the workplace generates trust between management and employees, while fostering a culture of hard work and innovation.
  • Step 4: Formulate and emphasize your business culture. When management takes the time to examine the company’s core values and priorities, then corporate culture stops being a set of buzzwords. A strong corporate culture, and adherence to it at every level of the company, is an investment in your company and the people who work for it. Just like investors know what their investing philosophy is, so should management know what their business philosophy is.
  • Step 5: Treat your business as a partnership, not a set of top-down directives. While investors may tell their stock brokers which shares to buy and sell, the smart ones solicit feedback from their brokers and take their advice under consideration. It should be the same with management and their employees. When everyone feels like they have a stake in the company and its success, this enhances the idea of a business as an investment, rather than a way to simply make money and move on to another venture.

In the article Treating your Company like an Investment by Craig Castelli writes: What is the difference between an investment and a career? The two words are rarely compared, but perhaps we should pay closer attention to their meaning. The best way to compare the two is this: you retire from a career, but you exit an investment. This distinction sums up the difference in approaches– retirement is a highly personal and emotional decision, whereas exiting an investment is a highly rational and non-emotional, business decision.

Unfortunately for many businesses, when it comes to exit strategy it’s tough to separate the emotional from the rational. Therefore, an exit is typically linked to retirement rather than the real factors that drive exit timing. I draw the distinction between investments and careers because I know far too many business owners treat their companies like careers…

The focus is short-term with primary concern being to make as much money this year as they did last year, in order to fund their lifestyle. Rarely, if ever, do business owners contemplate the bigger picture, including an exit strategy. Creating a strong exit strategy requires a shift in mindset; it requires thinking of the business as investment, rather than as a career. To this end, your business is no different from a stock or a piece of real estate, but unlike stocks or real estate, however, you have a lot of control over many aspects of the business…

Business owners that treat their business like an investment rather than careers embrace this mindset. Begin thinking about your exit… View your business as an investment, so that you can understand its actual fair market value… Take an investor’s perspective and view your business through their eyes…

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In the article How Do You Treat Business: Investment or Gamble? by Frederick Lam writes: There are two mind-sets for how you treat your business: Investor or Gambler. Think about it: Gamblers are taking chances– taking a lucky shot. They think that if you throw enough money at it, then it will grow-prosper. These are people who invest in technology stocks and pray that it will become an overnight success or they buy lottery tickets religiously…

The gambler mind-set is of hope, not of investment. In a sense, a gambler is living on prayer-hope, and banking on the idea that they will hit it big and get a 100x return… The problem is that it’s not business: Gambling is game of chance-high risk. For every one person that hits the jackpot, there are countless people who do not: In contrast, having a mind-set that treats the business like a true investment is the real key to business success…

When you invest instead of gamble you take ownership, which means that you have a different mind-set. You no longer live on chance but you have a plan, manage risk, make things happen… You don’t chase fantasies, but rather you invest in success. A gambler looks for an easy way out; whereas, an investor does their homework, researches… and finds a way to create a unique or untapped niche to leverage…

When you treat your business like an investment; you are not searching for get rich quick schemes– business success is a process, and not a one-time event. So, manage your business like an investment; change your mind-set, change your attitude, change your actions, and change the business results…

You can significantly increase your net wealth by simply changing the way you look at your business… According to Tim McDaniel; typical business owners have more than 60% of their net worth tied up in their business. That’s a huge piece of their nest egg. Yet, most business owners don’t treat their business as an investment, i.e., as something they need to watch, nurture and care for just as they do their 401(k), and other investments. Your business is every bit of an investment as stocks, bonds, mutual funds…

Treating your business like an investment is the key to increasing value and building wealth. There are five steps you can follow that will help you develop an investment mind-set, they are: Know the value of your business. Develop an investment mindset toward your business. Set a growth goal for your business investment. Protect your business from value detractors. Determine your exit strategy...

According to Gregg Hamilton-Piercy; while you are working hard to make the business profitable and to develop new strategies that will help it thrive; how often do you step back and view the business the way an outside investor might? Consider the fact that most of us have investments in stocks, bonds, mutual funds... Why then wouldn’t you consider taking a similar approach when it comes to managing what is potentially the most important piece of your illiquid personal wealth– your business?

The core idea is that, on top of running your business, it’s always a good idea to keep an eye toward ultimately moving it to market-ready status. Whether or not you are actively looking for a buyer, it’s certainly prudent to take steps that will prepare your business for situations where investors come to your door, so to speak…

According to Alex Tabatabai; it’s wise to treat the business like an investment fund; i.e., think of the business as an investment fund that’s 100% invested in the business… also, view the role of management as a capital allocators, on behalf of shareholders, and in effect a fund manager of the business…

According to Rosie Bank; the first rule of being in business is to take the business very seriously and view it as an investment… The second rule is to get in the game, stay in the game… create and execute a game plan that positions the business as a successful investment opportunity…