One of the possible options when it comes to investing and diversifying one's project is business. There are a few reasons why MCM invests into businesses in the first place. Some reasons include mitigating risk by diversifying into multiple industries and countries, as well as to protect ourselves from potential downfalls. Business itself carries risks, and without proper guidance, a beginner investor may have trouble figuring out what needs to work. Some individuals prefer to look at profit, while others at the growth rate. Some prefer to view the industry as a whole first, while others view the business from a holistic perspective.
Remember, success is a combination of these factors and more. That is why the Business Investment Life Cycle (BILC) is a very powerful strategy to consider! The BILC is a way to look at businesses throughout their stages from a total holistic perspective, and figure out how to invest using various methods (eg. through angel, ECF, P2P, VC, PE etc.). As a PMC, we want to maximise the value of the business, within the intention of bringing up its value. Within the company, we have created a set of strategies from researching business patterns at different stages and timing, all with calculated risk in mind. Understand business transformation at different stages is key to deciding whether or not to commit, and with the BILC, things will be much clearer.
Herewith are the main stages of MCM BILC:
Startups are brand new, on the rise and risky. Known as the birth stage of the business, profit is usually in the red and business owners are focusing all their resources into achieving stability. During this stage, careful planning and effective resource allocation can mean greater chances of success. Individuals can reap the benefits of potentially multiplying the capital over a few years. This means a high-risk, high-reward potential.
Going past the startup stage, the growth stage is where things start to pick up. During this stage, businesses are starting to generate consistent sources of income as well as maintain stability and increasing customers over time (though this may be through word of mouth or organic content strategies). There is still risk, but not as high as the startup phase. As a stable business model, the cash flow can cover overhead costs in general, profits would be seen on the rise.
Here, the company expands in greater numbers! This can be defined by its reach and market penetration, number of hires, or a mix of both as well as other factors. At this stage, the business model has found their market fit and chose to scale according to this new definition. In terms of employee responsibilities, they now have a greater focus as founders are there to maintain vision and direction. Customers and members of the related industry more or less know the name of this expanding company!
Now that the companies are stable, there would be annual profits. This is when investors can decide from a few options: maintain a relationship with the business owner or realize their profits by exiting investment.
Where should you focus on?
Investors come in all shapes, sizes and appetites. It depends on your resources and your willingness to be patient, but the most important question is:
what is your risk profile (risk appetite) ?
Do you prefer stable options or riskier but high-growth options? Do your current investing tendencies lean towards startups or stable companies? It's best to get a good idea of all stages of the cycle so you can position yourself best as an upcoming investor and never fall in love with your investment businesses.