As an investor, when looking at potential investments, you need a strategy to distinguish the opportunities with a higher potential for long-term ROI. When you’re investing in stocks, the businesses most likely to provide long-term ROI are the ones that invest in their own future from the inside out.
Experts often identify investment opportunities they say are great. However, before you invest, you’ll want to take it one step further and look at how the company is structured on the inside. Just because a company has a hot product doesn’t mean it's going to be a good long-term investment. If the company isn’t structured well from within, you might only see a short-term gain – or you could lose your investment completely.
Here are four simple tips to help you identify investment opportunities with long-term potential:
1. Determine whether the company is investing in its future
If a company doesn’t want to invest in its own future, why should you? Companies that do are more likely to stick around. There are many ways companies invest in their future, including:
Investing in ongoing marketing:Ă‚ Companies run by inexperienced people tend to view marketing as a bandage solution to drum up more sales. They only market as a means to an end when sales are slow.
Experienced companies, on the other hand, understand the real purpose of marketing is not merely to sell more, but encompasses the entire business including its reputation, customer experience and customer relationships.
Because a company’s target market will continually change, it’s important for it to continually evaluate its market to find out if it needs to focus on a new audience or make any adjustments.
When a company maintains an ongoing marketing campaign even when it's seeing success, it's more likely to do well long term.
Delegating or outsourcing tasks:Â This is what smart business creators do to remain focused on their big visions. If a company has a hot product but the creator gets stuck in daily operations, it could be a sign that it doesn’t have the skills to create a team. If a company remains a one-man-show for too long, it’s not likely to grow, and a company without growth isn’t a good investment.
Using productivity tools to automate: A company on the verge of long-term success will automate as much as possible – but without sacrificing the human aspect of the business. It will create self-empowering structures for its employees that require little to no maintenance including task management software and automatically scheduled shifts. Automating basic needs frees up the business owner to focus on growing the business.
2. Find out how the company is investing in its employees
Continually investing in employees automatically makes a company more valuable. When employees are treated well, it not only makes them happy, but they perform better overall.
Some of the ways companies invest in their employees include providing ongoing training, competitive pay and benefits packages. While these are pretty standard for most companies, there are companies that invest heavily in ongoing training –Â no matter what it costs.
The reason is obvious. If employees are the ones creating the products and services, then whatever a company sells can only be as good as the knowledge and expertise of those who built it. The best companies will train their employees not just to do their jobs well but to be leaders and problem solvers, too.
3. Find out if the company has a board of directors
A company without a board of directors is like a man lost in the desert without a map. Because people can become strong-willed and attached to their ideas, their stubbornness can affect the company negatively. A board of directors provides the objectivity needed to solve issues that require outside input from people who share the company's vision.
Many entrepreneurs struggle with receiving input from the outside and can be fairly stubborn in making decisions. This is one of the biggest causes for failure. Investing in a company without a board of directors could be unpredictible.
4. Trust yourself above all else
According to Warren Buffett, “anything can happen anytime in markets. And no adviser, economist or TV commentator –Â and definitely not Charlie nor I –Â can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.”
When you’re looking for new investment opportunities, pay close attention to the companies you’re thinking about. Look for the companies with big visions and mission statements reaching far into the future. Long-term vision indicates a higher probability of success, and that success could translate to long-term ROI for you.
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