Ayo Arowolo: Sharpen your business intelligence (2)

This is the second part of the lesson I started last week. It builds on the insights shared in the first part.

I had planned to keep another commitment that afternoon when my mentor called that I should meet him at a location in Badagry, Lagos State. Of course, I had to adjust my schedule to fit into his. I was at the hotel located at Badagry, Lagos State, on Sunday at about 1.00 p.m. My mentor had left an instruction with the reception that I should join him in the beach area. That was my third time at the resort centre and it was as cool as ever. I met him at the beach just gazing into the flowing water. He was excited to see me. “I can now see that you take this financial freedom project seriously. That is nice,” he said as we exchanged greetings. Some minutes later, one of the hotel attendants came with two plates of fish pepper soup and two bottles of Eva water which we took.

There is wealth in silence. We eventually settled down for serious business. I could see a copy of the personal financial plan I had given to him on the table in front of him. I was there with my own copy as well. I broached the business for the day. I wanted to know what he meant by a “separation session,” because he confirmed that he came alone to the hotel. I had thought that it was a strategy session between him and his business associates.

His replied; “This is yet another secret of informed millionaires. All informed millionaires I know of regularly separate themselves from the hustle and bustle of the environment and find a quiet place where they can commune with the Infinite Intelligence. Some call it a spiritual retreat. Whatever name it is called, the secret is that if you want to be successful in any area of endeavour, you must learn to separate yourself regularly from the maddening crowd and go to a place where you can be alone to hear the still, small voice.

“Well that is by the way. It is good you were able to make it to this place. Let me simply continue from where I stopped the last time we met. As I said then, going by your story, it was clear that you violated many of the rules for making, managing and multiplying money. All the actions you took then as I said could be traced to financial illiteracy which is what we have been dealing with since you joined my class last year. I am very sure you now know better. But it is still important that I explain everything to you so that you would be in total command of your financial destiny.

The first rule you violated is that you got into a business you knew next to nothing about. You are definitely not alone in this malady. I have seen many Nigerians burn their fingers by investing in businesses they were not familiar with. Informed millionaires across the world put their money only in businesses they are either familiar with, or in businesses where they trust the person running the affairs. They do not gamble with their money as most Nigerians do. Warren Buffet who is the world’s second informed millionaire invests only in businesses whose products he can explain and he has been successful at that.

“But for Nigerians this is different. Most people in Nigeria are afflicted with this get-rich-quick syndrome. I am amazed at the rate people put their money in businesses they can’t explain. For instance, what motivated you to put your money in book business? Did you know anything about how to sell books? I am very certain that you were attracted by the offer of incredible returns. If you rush to be rich, you would be poor very quickly.

“The habit of what I call blind investment is common among those who put their money in shares. Many people just give their stockbrokers a blanket instruction to buy or sell on their behalf. What they don’t know is that some of the brokers are as ignorant as they are when it comes to taking positions in the market. What surprises me is that when these same people go to the supermarket to buy clothes, they take their time to make good choices. They ask the shop attendants relevant questions before they finally pick what they buy. But when it comes to investing their money, they simply abandon their financial future to somebody who may not be as smart as they are. If you married a wife without knowing anything about her background, will you blame anybody if she later turned out to be a Mohammed Ali, punching you daily?

Many people who put their money in shares fail to recognise that investing in shares is like buying into a company. Therefore, it should make sense that before they put their money in shares they should ask the questions they would ask if they wanted to buy a company. For instance, would they invest in a company whose management they knew nothing about? Would they put their money in a company without a proper due diligence that will reveal the financial health of the company, its product range, its recruitment policy, its management team, its debt position and other barometers of financial well-being? Yet, this is what many stock investors in Nigeria do. They commit their money into the hands of a broker who could be experimenting with their retirement money. No wonder many stock investors are daily watching their financial freedom money disappear.

Once information is in the newspaper, it can hardly make money for you. A smart stock investor should call his broker only after he has decided on the company he wants to invest in rather than allow the stockbroker to dictate where he should put his money. A smart investor would not rely only on what the newspapers are saying to take investment decisions. It is usually already late by the time the information is in the newspapers. He would sniff around the company he wants to invest in and gather relevant information that can aid him to take informed investment decisions.

Interestingly, this exercise is usually not as difficult as many people think. Do you know, for instance, that if you know how to read the stock exchange official list, with some bit of analysis, using the published accounts of companies, you can take intelligent investment decisions all by yourself?

“My message is this: before you put your money in any business, you must either be knowledgeable about the business or be sure that the person who is going to manage the business is trusted and tested. I am very sure you were not surprised that you lost all your money in the two business transactions you described. But now you are wiser.

“Enough for today, we will continue from there next time,” he said, bringing the session to a close. We both went to his hotel room and I assisted him to pack his things. I bade him goodbye as we drove out of the hotel in our cars.

NUGGET

• Get a notebook now and start to record details of every kobo you spend. Do this religiously and analyse your result at the end of every month. If you are married, let your wife do the same for household expenses.
• You will be amazed at what this habit can correct. God will hold us accountable for every kobo that He pushes our way because we are merely stewards of His money.
• Remember: take action now! Share your experience with me.