What is Business Investment

Quamie Lancello Mr. Feinberg Economics 30 november 2017 Business Investment

In a person’s lifetime, the chances are they will receive many chances to invest in a business, but how do you know which ones are a good choice to invest in? Some of the things investors normally look at when choosing candidates to invest in are the operating costs of the business, the potential profits of the business, and the way the business responds to supply and demand changes. These components help investors to determine whether a business is a risky investment or a potentially profitable investment. By viewing all these components in my interview, I concluded that investing in Mr. Arius’s business 3SixtyDesign would be a good idea.

One thing an investor has to ask about is operating costs. Operational cost are the regular routine costs of running the business smoothly. These costs are different depending on the businesses type, there are several different operating cost that exist while budgeting a business. A portion of the operational costs are fixed, which means they are almost the same from month to month for example the rent. On the other hand, the rest of the operational costs are considered variable and can fluctuate from month to month,for example utilities. I think this business had a good operating cost since it was able to maintain itself with the profits made, and not go into dept.

There are 6 different supply shifters that can make goods increase, decrease, or stop the supply chain. For example, a supply shifter that can affect the supply chain is nature. Nature can create conditions that make it impossible to create and transport goods, for example hurricanes. Another example of a supply shifter is war. Wars and other armed conflicts can cut off a country’s access to the materials it needs to function. They create uncertainty about the future availability of commodities, and the risk associated with reduced supply can have a significant impact on prices and demand. Technology is also a supply shifter. Technology makes it a whole lot easier to increase production. This makes it cheaper to make goods making the supply higher. The main supply shifter of this company is the season. The company’s demand rises during the spring since people want nice houses during the summer. Nature also takes part, since this is a architecture company, if a natural disaster hits people would need to fix their houses.Demand is determined by how bad customers want or need a product. The prices of products play a big role in its demand.

In some cases cheaper products tent to get a higher demand and in some cases more expensive products seem to have a higher demand, because in both cases for whatever reason, people want it more based on price. Another way to determine demand is from the expectations a business has for a product. If a business expects a product to do good then they also expect the demand for that product to be high, vice versus. The business I chose had expectations for their products to do good in certain seasons which meant they had a way to anticipate demand shifters.

Profit is the monetary gain realized when the amount of revenue gained from a business activity passes the operating costs. Profits that are gained go to the owners of the business, who then have the choice on weather or not they want to spend it on the business. The Net profit of this business was 287,000 in the first year, and raised to 900,000 by the third year. This significant increase proves that this is a good business to invest in.

The business I choose to invest in has risks, however, this business also has many rewards. The risks of investing in this business still do not outweigh the rewards, however, some of the risks are having to use small scale advertising like social media. Another is not having enough workers to take on all projects, leaving gaps too big to cover. Another risk was low demand during the winter seasons and also compete with other larger architecture and construction firms. On the other hand, the business was still able to keep most of the supply shifters in check. It was also able to handle all the operating costs and still make revenue, and the demand was good because the pricing was lower than competitors. I would invest in this business, although the business still lacks the ability to handle other criteria. It does have the ability to take on operating costs and still be able to make revenue, handle the majority of supply shifters, and be able to handle a valuable section of demand.