This saying goes a long way when it comes to investing, and in actual fact, this is a phrase you should live by. If you are looking to make an investment and you are not worried about the outcome of the situation as you have other sources of income, and you’re willing to take a gamble, then so be it. However, if you are taking a gamble on money you really can’t afford to lose, you could be about to step into a nightmare. Smart investors will always invest money they can afford to lose, because any investment will have some risks involved, and you can’t leave it up to chance, because you could find yourself in a horrible situation, possibly losing a lot of money you’ve worked incredibly hard for.
Investing in money you can afford to lose is really rule number one of investing, so never forget this!
No matter what industry you’re in, when you create a start-up business, one of the first things you’re likely to consider is whether or not to look for an investor. Bringing an investor on board can make sense, especially if you find the right organisation or individual who can take you to the next level, but sometimes this is a step too soon for small businesses, especially start-ups. Let’s say you have absolutely no start-up experience whatsoever. It’s highly unlikely you’ll get a good investment with your first try. It’s often a case of trial and error when it comes to choosing the right investor, so you may want to get some experience in the bag first.
You also have to think carefully about ownership. You are essentially selling ownership so can’t decide everything by yourself. The relationship with your investor matters a great deal, so rather than working alone you need to embrace teamwork. It’s also important to think about how scalable the investment opportunity is. If for example, doubling your sales means doubling your headcount, then some investors may be deterred and rightly so. They need to see healthy potential. There are many cases where people get the investment they need but they can’t succeed even with the funds they wanted so you do have to think carefully about where that money will be utilised but there will never been any certainty of success.
If you’re only just getting the ball rolling and there is a lot more you can do on your own with the resources available, then you should put as much time and effort into getting your business setup. It’s a sad truth that many individuals work for free 24/7 on companies where they do not hold more than a percent of the shares, so whatever you do, don’t be that person!