Let’s add the different world to the business one. Investment Banking, Hedge Funds, you name it…
How are they making money? One of the golden rules is asymmetric risk and return.
What does it mean? It means that you invest, for example, 1 USD to make a 5 USD. The nirvana would be investing 0 USD to make USD. Hedge fund managers are paid to find these trades. But why should only they do that? Why not use the same strategy in the business?
It would be best to act as an investor in your business. You buy assets (inventory, machinery, employees, and others) to make sales revenues, then turn revenues into profit and profits into operating cash flow.
The experienced investor is always looking for the highest and best use.
If you buy real estate and want to make money, you will be looking at the highest and best use of the location/real estate. The same should be with investing your money into your business.
Unfortunately, most business owners do what everybody does: advertising, opening new branches, building manufacturing, hiring salespeople, and other typical things. Instead of looking for asymmetric risk returns and highest and best use.
Isn’t it a waste? Business is incredible because it’s much easier to find these returns or even infinite returns.
If you do a strategic partnership, mergers & cross-sells, and other strategies, you can invest 0$ in increasing your revenue.
You can buy distressed businesses next to nothing or great companies at arbitrage and add it to your existing business to create asymmetric risk and returns.
You can add additional products your ideal clients are buying by partnering with other companies. Let them sell their products to your database and collect extra money. The cost of doing that would be 0 or maybe little should you want to do a letter campaign, call your customers, or do other advertising to your database. But the risk is way lower than spending speculative dollars for advertising to find new leads.
Your problem is always a solution for somebody else. So, find the people and the companies, solve their problems and solve your problems as well.
Five top asymmetrical risk/reward strategies in business
- Optimization & Maximization (Sales, Finances, Marketing, etc.)
- Strategic Partnerships
- JVs
- Mergers
- Acquisitions
Your money could be used better. You can grow to the next level, break the glass ceiling and create a business that will take care of you and your family for generations to come.
Is it a bad idea to get a second opinion on the highest and best use in your business and find asymmetric risk/return?
Schedule a free consultation for companies with over 500,000 USD in revenue now. We will find the highest and best use in your business and create an execution plan for you for free.
Krystof