There are two ways that you can invest in a business. You can become a partner with someone or you can purchase stocks. The stock market is the most popular and easy way for many people to invest money into businesses that they deem worth it. But how do investors know that a business is actually worth investing in? There are a few key components that must be looked at before making the investment.
3 Things to Look at Before Investing in a Business
- Growth Potential
Just because you want to invest in solar energy doesn’t mean you invest in the first solar opportunity that comes your way. You must research each individual company that is related to your personal investment interests. Research the upper management and CEOs of the companies and research previous stock trades and how they have appreciated and depreciated over time. High dividend stocks yield higher income potentials for investors. When the stock is worth more and has continually held a high value, it typically will fare well on the stock market and remain a stable source of appreciation.
Businesses publish their quarterly financial reports and these reports will show how they are in comparison to other similar businesses. Monitor the financials and make sure the company is making money and their revenue is promising. If the company has been in business for a few years, make sure you research all of their financials and look for trends.
3. Growth Potential
Some stocks sell low because the company is new. There will not be a lot of research and financials will be short. These stocks can show growth potential and should be considered. These are riskier stocks to purchase but sometimes the end result was worth the gamble. When looking at these new stocks, you have to look at the potential need for the services the stock represents.
Here are some examples of up and coming investments opportunities a lot of people are monitoring:
- Clean Energy
- Home Delivery Based Businesses
These three types of businesses have actually been on the rise due to need.
a. CBD and Dispensary Products
With the legalization of CBD products, a lot of dispensaries have opened up coast to coast. These dispensaries sell both recreational grade and medical grade CBD products. People have been frequenting them for lotions to help with arthritis and gummies for anxiety, in addition to medical card prescriptions. A large variety of products are entering the market place on a monthly basis and the stocks have been rising consistently.
b. Clean Energy: Solar, Wind, and Water
Clean energy has been gaining popularity over the last decade. A lot of investors feel as though it is a safe business to invest in because more and more clean energy items are introduced to the consumer market annually. This goes beyond solar panels and includes smart cars, energy star appliances, wind energy, and solar energy. Some regions of the United States, such as California, are mandating all new homes built after 2020 to be equipped with solar panels. These bits of legislature are good for both the earth and for those invested in solar energy and panel manufacturing.
c. Home Delivery Services
The pandemic has forced people to increase their home delivery services and cut back on frequenting stores all across the world. Delivery services like Hello Fresh, Amazon, and Chewy are all busier than ever. Any new start-up company that features home delivery in the field of food, goods, or pet needs is worth looking at for an investment opportunity.
There are plenty of new start-up businesses that have a lot of potential for growth within the stock market. The biggest factor is deciding when to jump in and take the investment risk. Investors can also invest financially into businesses and become a partner. Retail and restaurants are the two most popular options. These investments should be made cautiously and with a well-planned business strategy by the entrepreneur looking to open the business. A lot of money can be made with becoming a silent or non-silent partner, but the business plan must be well-devised and executed.