Many investors continue to think to their peril that the term emerging markets refers solely to foreign "evolving " economies. You only need to look at the results of investing in most things Africa these days with a whole new meaning to the term political risk, and the folly of that choice (NY Times Egypt News - Revolution and Aftermath).
Instead look in our own back yard, at markets that offer the upside of returns because they too are emerging, but are close to home, operate in a political environment we all know, deal with demographics well known to western business, and are emerging not culturally or economically, but because of changing paradigms and technology, the online market? Wouldn't investing in Companies that are destined to be part of the soon to be emerged online market be something worth looking at?
As a "kicker" to your portfolio's returns, the answer is a profound yes, but only if the fundamentals behind a business that has positioned itself in such emerging situations are sound. I have strong experience-based opinions on what those fundamentals need to be:
- Well researched market opportunity;
- A revenue model that is evident and plausible;
- Sizeable target market (> 10.0 million potential customers);
- Competent experienced management;
- Detailed activity based business plan/model:
- The business model must actually be the business plan as well;
- In other words this means the model gets built just like a mature business would do it's plan, based on activities, and the costs thereof reflecting revenue generation that realistically derive from these activities:
- As an emerging business the assumptions behind the activities require vigilant review and fine-tuning as results are experienced;
- Commitment to continuous review of results against plan on a real-time basis:
- A comprehensive management information system ("MIS") needs to be in place, measuring all the key performance indicators ("KPI's) for the business on a real-time basis;
- Today's technology provides access to solutions that provide this information;
- See my Blog article on MIS in today's business world at InHouseCFO/Blog/MIS.
Refer to the "Solutions" section of our Site for one business that we are bullish on, and have found fits the above criteria very nicely.
dmcTM
(Don Cameron is the Managing Director of InHouseCFO Inc., a consulting business dedicated to ensuring that growing business' and their Founders succeed by focussing on results management, business disciplines, and custom built investment strategies. He can be reached at donc@inhousecfo.com)