Why did you go into the business you are in right now?
Chances are that you chose your business because a) You knew how to do it better that others; b) It seemed like a great idea at the time or c) You got in to support someone else who was already doing it.
What a lot of business people do not realise is that just by choosing to be in a certain industry, you have predefined how much return you are going to generate – even if you are the best in that business. Below is a chart of a study of various industries and the return that they generate on average.
What’s clear here is that you cannot be an airline company and expect to be extremely profitable if you do not have a lot of capital to invest. Some businesses can only grow in profitability with continual capital investment. Others however, can be a lot more nimble and return generate a lot more bang for every pound they invest.
Let’s look at your business as an investment opportunity –
Investment Option 1 – Invest £100,000 for a tentative return of £10,000 every year
Investment Option 2 – Invest £25,000 for a tentative return of £10,000 every year
Which business would you choose now (ceteris paribus)?
All business is not defined equal. The industry you are in has by far the largest impact on how much money you are likely to make. For those of you at a stage where you are thinking of expanding to other businesses, do give this a serious thought.
If you recognise that you are in an industry which requires capital and finance to grow, don’t lose heart yet. If you are clear that you want to grow and require help accessing finance, drop us a line and let’s talk about the options on the table.