Five ways on how you can deal with bad investment

Don't invest in something that doesn’t turn out as envisioned. [Photo: Courtesy]

The ability to take risks is one of the defining traits of a successful entrepreneur. However, since we can’t see into the future – at least not yet – there are times these risks won’t pan out, particularly if they involve money.

So how you deal with it when you invest in something that doesn’t turn out as envisioned? How do you make sure one wrong turn doesn’t cripple you or your business? Here are five tips. 

1. Cut yourself some slack

First, focus on what you can control. Channel your efforts towards the things that you can change going forward.

After all, isn’t it said that failure can teach you more lessons about success than success itself ever can?

Daymond John, the owner of Fubu, one of the world’s leading apparel brands, is on record saying he’s failed more times than he’s succeeded.

Therefore, the implosion of a deal isn’t necessarily fatal nor are you the first or last to experience loss. You can rise above the situation and rebuild like those who’ve gone before you.

Don’t miss out on what else could be out there for you because you’re sulking over a bad investment. Rather than letting fear dictate your next steps, work extra hard to avoid falling into the same hole.

Take time out – but not too much – to restructure your thinking so you’re not paralysed by loss.

2. Figure out what went wrong and find a way forward that prevents future loss

If your business has other decision makers, it may be time to call a meeting and do some housekeeping.

Evaluate the causes of the loss and examine weak points in the business structure or management attitude that led to the poor investment.

One of the best ways to secure your future is to look at your past – a lot of the time, history repeats itself. Prevent this from happening.

Be deliberate about your actions to change the situation and make your business less susceptible to bad investments.

3. Ask for a refund (even if it’s not in the policy)

Depending on the type of investment you’ve made, you could be presented with the option of withdrawing from the deal as soon as you realize it’s falling apart.

There aren’t many investments that allow for refunds or compensation, but that doesn’t mean you can’t ask.

You may be able to get your money refunded, at least in part. Look into negotiating a repayment plan.

However, even if there’s no way of getting your cash back, make sure you’ve learnt the lessons that you can, and then move forward.

4. Stop digging

Losing your money isn’t a fun experience even if you’re the wealthiest investor around. Any business investment, after all, aims to make a profit.

That said, once you lose money, you might be tempted to spend more money trying to recover the loss. While it’s OK to try your best to salvage a bad situation, don’t get caught up in the sunk-cost bias

The attachment you had to a deal, the amount of time and money you’ve spent on it may hinder you from realising the investment is a dud, and you can’t recover what you’ve put in. Abort the mission, cut your losses and stop throwing good money after bad.

Basically, if you find yourself in a hole, stop digging.

5. Start looking for your next deal

Take the time to evaluate the decisions that led to the bad investment, but don’t spend too much time reflecting on the past. The risk of this is that you might over-think the loss and fail to invest in the things that could actually turn your fortunes around.

This will affect your business, and you might find your competitors gaining ground while you mark time.

As hard as it may be, you need to pick yourself up, dust yourself off and begin preparing for the next deal. Don’t let fear and regret keep you rooted in the past while everyone else marches past you.

The world of business is volatile, unpredictable and full of risks. You will fail, but that will only make the successes that much sweeter.

Don’t stay in retreat mode – take on the challenges and relish the chance to prove your mettle.