While this can seem a logical extension of a business, it’s important to know that operating and investing are completely different pursuits and require very different skill sets. To get started, try to define the mandate of the department. It’s useful to understand whether the investment process you envision is designed to broaden your current business or to better use existing capital.
Investing in business lines related to your primary business can often inform buy vs. build decisions, can help define product extensions by better understanding costs and market dynamics, and can also bring your firm closer to suppliers, distribution or product innovation. If this is the goal, target investment opportunities can be filtered through the lens of vertical or horizontal extensions to the existing business. The best investments are ones where there is a natural asymmetry in marketplace information, where the opportunity is informed by your existing business knowledge.
However, investing can also be incredibly distracting for the core business, and rather than diversify the firm’s risks, can often concentrate them. Having defined the purpose of the investment program, it can be helpful to know in advance which resources you would use to make investment decisions, and more importantly which would be deployed to solve problems should a portfolio company run into trouble. You want to avoid the scenario where you have your best talent working to solve problems in a small investment instead of running your primary business.
Finally, it’s important to have a clear and shared view of how and when to exit investments. It’s easy to get behind great people; but if they turn out to be unproductive or your business is better off deploying capital in a more productive venture, having pre-determined rules of disengagement can be as important as understanding why you’re initially setting up the department.
Build an investment thesis where you have a substantial plan, estimate returns with backed up numbers, know EVERYTHING about that market and make sure you're ready to start another 40 hour job on top of your current one. It is way more work then you'll think if you're doing proper diligence and sourcing. Well over a normal work week.
Are you looking for suitable investment opportunities? Or you are looking to set it up from a reporting/accounting and managing stand point?
Make it a completely separate entity. Make it responsible for its own costs, revenue, and profits. Keep it clean.
I am not trying to sell you on calling me. Really, I am pretty busy with my businesses and consulting. However, I need more info before I could have a greater impact in helping you.
Ask, Ask, Ask, then Ask again.
Here is $10,000 worth of information for free and in a nutshell.
Concentrate on the 3 M's. There are actually 7, but 3 will do for now. These are Market, Message, and Media. They come in that order.
Who is your target market (customer, clients, buyers, users, etc.)?
Tailor your laser focused message for this target market.
What is the best media mix to get your message to that market?
Here's what you do...first, make it an offer that is so incredible that they cannot resist. Secondly, do all the work for them. Make it so easy to make the purchase now that they can do it virtually without effort. Thirdly, give them an incentive to act right now. Fourthly, offer an almost unbelievable guarantee. Fifth, offer a bonus for acting now. There are many other incredible steps, but these steps should help the novice to the professional sell anything.
Whether you are selling B2B or B2C, you have to focus on selling to only one person. You can actually sell to one person at a time while selling to millions at a time. They are one and the same. Don't get off track, what we call digital marketing selling is just selling in print. And that has not changed since Cluade Hopkins wrote "Scientific Advertising." Really long before he wrote the book.
The secret to success: I have had the pleasure of knowing and working with some of the biggest names in business, celebrities, actors, entrepreneurs, business people, and companies from startup to billion dollar operations. The number one reason for their success is doing what they know and love while doing it in new, creative, and innovative ways.
Ask, Ask, Ask. Have thick skin and learn from each "mistake." In a short while, the market will tell you what you need to do and who and what you need to ask. But get started now even if that just means asking a contact on LinkedIn.
While you are thinking, think big and think of something at least 1% better, newer, or different. And being cheaper is not a winning strategy.
Make decisions quickly and change decisions slowly..unless you are actually going off a cliff.
Remember these two 11 letter words...persistence and consistency. They are two of the most important tools ever invented.
Treat everybody you talk to and everybody you meet (including yourself) like each is your number one million dollar customer.
Bootstrap when possible and reasonable. Read "How To Get Rich" by Felix Dennis. Or better yet just remember the camel's nose in the tent story.
However, sometimes you just need to make a deal.
Listen, in any business you have to take some chances and some risks. Make sure you don't need a license and go for it. Remember, timid business people have skinny kids. Paraphrased from Zig Ziglar.
Best of luck,
Take massive action and never give up.
Michael Irvin, MBA, RN