Brief-case analysis and solution
Investing in the world of business is a process that requires a clear and well thought out business plan. Investing in owning a business and making a profit has been identified to be among the vital leading causes of business failure, loss of a huge amount of capital investments, and resulting in frustrations for the investor. Doug Cook is an aspiring business owner who has not made up his mind on the exact kind of business that he could like to venture into and is still looking for suitable investment avenues. There are three institutions that Doug is lost for choice about an acquisition. These include; Luxury Tassels Inc., Feldco Window and Doors Inc., and Coyote Consulting Company. His uncertainty is made worse by the fact that he has heard various disconcerting stories from other entrepreneurs who had lost their investments during the due diligence period to altered book records and inflated earnings.
Problem Analysis
The challenge that Doug Cook is going through is a typical problem that most first time investors experience in the attempt to decide on a viable business entity in which they desire to invest their assets. The problem is worsened by the fact that most of these first-time investors have no fall back plan, and therefore, in case their investment plan fails, then they may end up losing all their hard-earned money, which may offset the balance in their lives. For instance, Dough Cook’s biggest purchase in his life, up to this point in his life, was a $250,000 condominium in downtown Chicago. Based on such purchasing power, it is possible to understand the genuine concern that Doug has in ensuring that the investment decision he makes is sound.
Potential Solutions
There are various potential solutions that Doug could apply to solve his investment acquisition dilemma. The initial and most common solution that other investors experiencing similar challenges apply is detailed and in-depth research of the various incorporations that he wishes to invest in. Basing the available information of his own analysis and assessment of the corporation in the market sector, it will be possible for Doug to identify which entity has the likelihood of promising returns.
Consequently, Doug could also identify other investors in the shortlisted corporations and seek for background information on the return rates that these investors realize from their investments. Based on the consistency and frequency of the payment of these returns, Dough could be able to ascertain whether the disconcerting stories he had heard hold any ground or were just meaningless propaganda. With his newly acquired information, he can comfortably pic the corporation that is tailored to best meet his needs.
Recommended Solution
It is a common saying to never put all your eggs in one basket, which has huge applications in our day to day lives, including the business world. A key recommended solution for Doug in his investment decisions could be in the diversification of his portfolio. Rather than investing in a single entity, he could single out two or all of the three institutions and divide up his initial investment amount to the most appropriate proportions. Through the diversification of his investment option, Doug could be able to minimize the associated risk in the event that one of the enterprises fail.
Works Cited
Rogers, Steven, and Roza Makonnen. The entrepreneur’s guide to finance and business: Wealth creation techniques for growing a business. McGraw Hill Professional, 2003.