Courtney Myers Blog | Four Elements to Analyze Before Investing in a Small Business | Talkmarkets - Page 2

Four Elements to Analyze Before Investing in a Small Business

Date: Wednesday, September 19, 2018 5:30 PM EDT

As the economy ebbs and flows and production costs rise, a business with a razor-thin gross margin will likely have a challenging time keeping pace with the increase. Yet, one with a little wiggle room can comfortably transition and still stay in the black. As an example, one industry with comfortable gross margins is the specialty/green living sector, which includes products such as organic household goods, all-natural dog food and more. As customer demand for these products continues to increase, small businesses that can ramp up production and still keep gross margins high will be those worth watching and investing in.

2. Brand Position

Put simply, what unique factor does the small business offer consumers? What is it doing differently than everyone else that will earn it brand recognition and allow it to stand out amid the clamor of competition? This is the company’s brand position and while the concept might sound ambiguous, it is essential to understanding the long-term value and relevance of the company.

Keep in mind that even if a company isn’t revolutionary, or is offering a product or service similar to someone else, it can still be a valuable investment option.

Yet, there should still be some form of differentiator and in many cases, this falls upon marketing and packaging production. Does the company use dynamic design, sleek graphics and beautiful packaging to woo its target audience? If so, don’t cross it off the list just yet, even if it is offering a run-of-the-mill solution that you can buy at any big-box store. Humans are highly visual creatures and if the branding is strong enough through design, they can be swayed.

Before making your investment decision, research what people are saying about the company. That is its brand reputation, and you can find elements of discussion, from social media posts to customer feedback surveys, that are rich with data on this point.

3. Strong Leadership

It might sound cliche, but a small business is only as successful as its leader. To this end, learn who comprises the C-suite of the company in question and start your background search from there. At the very least, the CEO should be a person of integrity, drive, revenue, resources and connections. He or she should ideally have educational and professional experience in a related field and a unique skill set that makes this a natural fit.

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