Some investment concepts are harder to understand practically. For business owners, these are often second nature. Here are three things business owners understand well about investing:
Risk
The experiences of operating a business changes how owners see risk. They don’t view investments as abstract letters on a statement. They understand the moving parts: the cash flow, the hiring, customer acquisition, profit margins, the list goes on. They also understand that life isn’t linear, and business certainly isn’t linear. Value, profitability, revenue… they rarely go in a straight line to the upper right corner.
Patience
Another thing that I admire about our business owner clients is their patience. They have lived through market cycles, setbacks and recessions. Often, the uneasiness that the rest of us notice in the stock market, they view as a walk in the park compared to some of the scary times they have experienced while running their businesses. This makes them less reactive, and better at sifting actual news from annoying noise.
Diversification
When we preach market diversification, business owners sometimes are tempted to yawn. Because they do this, too. None of our business owner clients rest easy when they see that a single customer makes up 40% of their revenue. They like to be diversified in their revenue streams. For example, some business owners apply diversification principles within their companies, such as a manufacturing company needing to build into capital expansion budgets as well as maintenance budgets. This way, whether the market is rising or falling, they are meeting customer needs and keeping the company profitable.
Owning a business doesn’t just help create wealth – it helps build the discipline to preserve it.
This material is provided for informational purposes only and should not be construed as investment advice or a recommendation.
All investing involves risk, including the potential loss of principal. The views expressed are general in nature and may not apply to all investors.