September 28, 2020 5 min read
The opinions expressed by the entrepreneur’s contributors are their own.
The business is full of betting, especially when it comes to investing. If you’re interested in rolling the dice by buying a business, making an angel investment in a startup, or even using your hard-earned cash on your first employee, knowing what makes a smart bet and how you are is important Can protect against a bet worst-case scenario. It’s worth noting that even making the decision to start your own business is a form of bet and deserves the same kind of background due diligence.
This may require testing or the acquisition of new knowledge. However, a thorough understanding is critical, especially with blatant stats on startup failure rate at a whopping 50 percent, according to Small Biz Genius. With statistics like this, there is no way to ensure success. However, there are definitely ways to rethink potential pitfalls in business models and feel more confident about where you are investing your money and time.
Related: Make Your Money Grow: How To Get Rich With Smart Investment
Check demand by popularity
When it comes down to it, a safe bet in the business depends on how many customers want what you’re selling. If you can do market research and check demand, you are in good shape. Demand can come from the value of the product – for example, its ability to solve a problem – or even from the person selling the product, like a great celebrity who has built the trust of millions of online followers.
This is one of the reasons great influencers and celebrities can get lucrative book deals. Publishers know that everything they publish will fly off the shelves. The demand from their fan base is verifiable. Take comedian Amy Schumer, who signed an alleged $ 8-10 million book deal for The Girl With the Lower Back Tattoo in 2016.
Check the demand through tests
If a celebrity or big influencer isn’t in the equation and you just want to find out how a product will sell, try a “market as if it’s a real one” testing approach. According to Ron Rule of the Entrepreneur’s Handbook, this is because “the only way to really know if someone is going to be spending their hard-earned money buying your product is to have it in front of them.” Otherwise, market research only a speculation. You get more clarity than usual, but it doesn’t mean much until a target customer’s wallet is affected.
Rather than go to the hassle of actually building the product and then seeing if there’s a need, Rule recommends prototyping the product in Photoshop, setting up an ecommerce website, and then leaving payment processing in test mode with the credit card one Potential customers will not be charged for a fictional item.
Then start driving ads to the page to see if customers are actually buying. “Personally, I would spend about $ 10,000 on a proper marketing test, but you can start with a lot less if you don’t want to get that high right now,” explains Rule in his book. “I recommend spending at least $ 1,000 because you want enough clicks and conversions for the data to mean something. Trust me, it’s a hell of a lot cheaper to lose $ 1,000 on a marketing test than it is to lose tens or hundreds of pieces of data, thousands of dollars in making a product that nobody wants. ”
Sometimes the best bets require a small upfront investment for a large payout in the backend first.
Immerse yourself in the industry
The more you know what you’re investing in, the better your bets can be, which usually pays off in the backend. This advice comes from sports player Zach Hirsch. At the age of 18, Hirsch is considered one of the most capable sports analysts in the field of gambling with an accuracy of 90 percent in his predictions (which is over 20 percent above the industry average).
Hirsch’s best advice for solid betting is to delve into the industry. For Hirsch, he takes that advice in the kind of sport he is betting on, but the advice also applies to business investments. “Learn everything you need to know, get in touch with the experts and do everything you can to improve your understanding of the craft,” recommends Hirsch. This advice can be expanded to get to know the founder of the startup you are investing in or to make sure you know as much as possible about your new industry so you can clearly see how a product or service is performing. Do your backup research and then do some more research. Keep having important conversations.
Related Topics: How To Invest Your Hard Earned Money In The Right Project
Even with verified demand and a thorough understanding of your industry, there is no guarantee that your investment will be 100 percent safe, but at least you have the perspective of spotting potential bumps in the road or blatant stop signs when making your betting decisions. These insights can make all the difference.
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