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Saying that the economy is tough at the moment may seem like an understatement. With taxi fares increasing by 20% and salaries remaining stagnant, many Namibians are looking for alternative forms of investment. The need to provide for their families has seen many investing in business ventures that promise high returns in a short period of time.

We have all been approached by a friend or relative who wishes to introduce us to the next best thing investment idea.. Investing in these ventures is simple enough: you pay them N$2 500 and then get four other people to pay you, giving you a N$10 000 return on investment. High returns with minimal effort. But if money was this easy to acquire, wouldn’t we all be rich? When an investment sounds too good to be true, it usually is. So before investing, ask yourself: is this a safe investment or a pyramid scheme?

A pyramid scheme is a business model that promises investors high returns as more members are recruited. Whether selling goods or services, income is solely based on new recruits. If your investment opportunity has the following characteristics, you may be investing in a pyramid scheme:

  • Promise of high monthly income while working from home,
  • Requires an investment in the form of paying for membership or buying products from the company,
  • Places large emphasis on recruiting others to join the business,
  • Has a complex commission policy or marketing plan,
  • Business sells primarily to members and not outside distributors, and
  • Returns sound too good to be true.

However only you have the discretion to decide which investments you make. So next time someone asks you to invest in the next best thing, make sure you’re not being scammed.

Like in many countries, pyramid schemes are illegal in Namibia under the Banking Institutions Act of 1998. If you suspect you are involved in a pyramid scheme, you can contact Bank of Namibia at info@bon.com.na or +264 61 283 5005.

By Ros Limbo (Freelance Writer) 

Here are but just a few concepts all serious entrepreneurs know. If you want to attract an angel investor you might want to incorporate these concepts in your business language.

Bottom Line:
Net earnings and net income both fall under the “bottom line” description. You may hear people talk about “affecting the bottom line” of the company and this is simply any action that may increase or decrease the company’s net earnings, or overall profit.

Gross Margin:
Gross margin is expressed as a percentage and represents the percent of total sales revenue that a company keeps after subtracting the cost of producing its goods or services. The higher the percentage, the more the company keeps on each dollar of sales (that will eventually go toward paying its other costs and obligations).

Equity versus Debt:
The “equity versus debt” comparison may seem silly to some, but you would be surprised at how many people I have come across who have no idea what either really means. Equity is simply money obtained from investors in exchange for ownership of a company, while debt comes in the form of loans from banks that must be repaid over time.

Leverage can be interpreted a couple different ways. In the financial world, leverage is most commonly known as the amount of debt that can be used to finance your business’ assets. In simple terms, the amount of money you borrowed to run your business.

Concentration is simply the measure (usually a percentage) of how much business you are doing with a specific client or partner. Relying on one or a couple of clients and partners to do business is a prime example of over-concentration. This is a losing strategy for any business because if something goes wrong with those limited relationships your business will be in serious trouble. Focus on keeping low concentrations for your accounts and investors will be impressed.

By VentureBeats