“Never invest in a business you can’t understand” – Warren Buffet.

We live in a world where money is the basic motivation that drives investment to the extent that people are more interested in the cash inflow than learning the process. Many can’t even think straight about the viability or lifespan of the business they are doing.

But experience has taught me how not to be a fool. These days, I’ll rather put my money in the bank than put it in a game of luck. Well, I didn’t get the money by winning a jackpot so why should I gamble with it?

Bad investment can come in different ways but we will be focusing on two major ways in this article:

1. Investing in the wrong business – this can either be a business you don’t know anything about or one that is too good to be true. We sometimes call it HYIP (High Yield Investment) or Get Rich Quick. Pay $20, 000 get $300,000 in 2 weeks.

Some years ago, I was discussing retirement plans and investment strategy with my dad. We discussed for days, shared different stories and finally reached a conclusion.

Out of all the stories shared, a particular one keeps coming to my head. The story of a man who retired at the age 60years and got N4,000,000 ($25,000) gratuity. About 30 years of his active life were used to uplift the company without having a personal asset. Both the car and the house he used belong to the company and these they took from him immediately he retired. He got his gratuity and fear set in: “How do I continue to live my life without a monthly income, a home to call my own and a car?” He got stuck between building a house and investing in a business.

He was still thinking of what to do when a younger friend approached him and dangled the new business investment in town on his face. “It is called the more the merrier sir. All you need to do is to invest an average of N500, 000 get 5 people to do the same and you will get N15million at the end of the 6th week.”

Instead of finding extra five people to invest on his chain, the man invested N3,000,000 for himself, wife and children. He counted days and nights, weeks and months . . . for the D-day- for a return of his investment, which never came! Our dear friend lost his sweat of 30 years to “wonder banks.” Instead of the promised “the more the merrier,” he died less than a year from stroke.

Sad as it is, this is the kind of business investment some youths are more interested in. They want to give their capital/principal to someone to push while they wait to get higher returns. No wonder one of the popular searches from Africa is “How to make money online from your room!”

I’m not saying it’s a bad idea, but 99% of those that invested in such businesses lost their principal and even got poorer. Invest in what you can see!

2. Investing in a business that is not well managed – Back to what Warren Buffet said, never invest in a business you don’t understand. Having an initial idea is not the real thing. People jump into some businesses because of the financial numbers. Imagine oil and gas business . . . Everybody wants a bite of it either as a career or as a business. How many people actually know the nitty-gritty of its operations?

As a business owner/investor, you should not only understand the A –Z of your business, you should be keen on its operations and deliveries. We live in a world where some workers are more interested in enriching themselves than the company they work for. At every slight opportunity, they abandon what they should do and focus on their personal live. Social media evolution has really helped in reducing productivity. No wonder many organizations now block access to some social sites. Some even go to the extent of siphoning the company’s fund without caring if the business is operating on loan or shared equity.

I was at a bank some months ago to make an enquiry at the customer care stand. While I was talking, the lady was busy replying chats on her BlackBerry. I discovered she paid more attention to her social life than her business life. We exchanged some hot words since she insisted I should repeat myself while still replying chats. I had to report her to a superior officer and finally moved to another bank. Will you be happy as an investor in such a bank?

Bad management doesn’t stop and end with the superior officers; it extends to those in the lower cadre. Everybody should be held responsible to deliver quality so that the company can gradually scale. Look at the Disney and the Wal-Mart of today . . . . . they started small, managed well and scaled quickly. Once proper management is off a business, it is as good as a dead horse.

To ramp this up, if you are not interested in managing your business well, or you want to double your principal in 24 hours, I would suggest you should not waste your hard earned money. Just take your family members to a good restaurant in town, eat the best of the best and make sure you buy something for the beggars on the street. This is better than blindly throwing your money into the abyss.

How To Deal with bad investment  Steps to follow when investing:

1. Don’t ever rush into any business

2. Try and understand the practical part of the business by educating and updating yourself –Don’t just learn to run a business on paper.

3. Nothing stops you from interning – this helps you understand how to run a business in a particular field you choose. If you are still young, go approach any company you are interested in. Six to twelve months internship is fine.

4. Keep understanding what you are doing. In this world of new media, things are changing very fast and nobody wants to be treated conventionally.

5. Ask questions and don’t shy away from the truth.

6. Invest less than 10% of what you have and scale gradually.

7. Don’t try to achieve in one night what Dangote has achieved in Ten years. Take your time and be sensitive to the law of change in the market.

Nothing ventured, nothing gained- But don’t throw your investment away in a hurry!

Feel free to leave your comment, questions or ideas in the box below. Or Tweet at me online @AjayiJacob


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