THE IMPORTANCE OF INVESTMENT APPRAISAL BEFORE STARTING A BUSINESS BY NWADEI IFEANYI, ACA Investment may be described as all activities

aimed at increasing income. It is about committing idle fund or resources and utilizing same to bring about additional resources. It brings about increase in material possession. This can also be described as wealth creation. The ability to create wealth through undertaking investment is a skill in itself. This skill can either be learnt through training, assistance by an expert or by association with a successful investor since it is not equally distributed to all by nature. Investment activities are usually carefully planned and executed. Such planning is what experts call Investment Appraisal, Market Research or any other name as the case may be. Investment Appraisal may be carried out by anybody, though, it would be better if it is carried out by an expert. The expert in this case may be a chartered accountant or any other qualified professional. The professional then would conduct an analysis of the investment opportunities available with due regard to the investors situation and environment. The analysis ought to highlight all possible opportunities that fit the investors needs and advice on the optimum option. The objective for most investments is profit. This profit motive is what makes investors evaluate alternative causes of action before undertaking any investment. Very few people invest in not for profit organization. This few like the government invest in social goods. Both kind of investments serve humanity and lead to ultimate social balance. The investment in social goods is such undertaken by charity organizations etc while investment in profit making organization are such like business outfits one sees in the neighbourhood and other public companies. Investment, therefore, is determined by the motive or the objective of the investor. Every man appears to have investment desire. This desire may or may not manifest in ones life time. The manifestation is drawn from ones social perception of oneself and strengthened by the competitive spirit of capitalism.
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Though, the manifestation may not appear to all potential investors at the same level of clarity. This then is the need for expert who is trained to clarify such visions. The expert serves as a director and a motivator to the investor who is then led to define his/her investment desire to fit his/her interest in life. Ones investment must be in line with ones life interest; otherwise, the objectives of the investment may not be pursued with the required vigor. For instance, one who does not like the smell of medicine may not likely invest in pharmacy business all things being equal. Self interest is also a very important factor in choosing a profession or course of study in the higher institution of learning hence counselor is always there to assist students in making this choice. Investments do not exist in isolation. They exist in societies where laws are made to enhance harmonious existence of all members. Laws are also made to guide the operation of businesses for the good of the society. Therefore, the knowledge of the operating laws in the society where your potential investment will be situated is very important. The effects of the existing laws in the chosen sector for investment must be well assessed. The knowledge of current tax laws and their effect on potential investment is also very crucial. The investor must know that laws in some cases are more favourable in some sectors of the economy than the others. The adequate knowledge of the law and its effect on potential investment cannot be over emphasized. It will not only make a potential investor not to fall foul of the law but will also make him/her to secure the investment. An investor should at all times comply with the existing laws in the nation and all relevant laws regulating his/her particular trade. Investment cannot be said to have been properly undertaken without adequate consideration of man power need. Skill requirement for different investment differ. A potential investor need to assess the skill requirement of an investment to be undertaken. The size and nature of investment will determine the employee mix. This assessment will enable the investor know the available labour; determine the process of meeting possible gap between available labour and required labour. So many schemes may be developed to achieve this such as inhouse training, use of expatriates etc. The knowledge of labour requirement of a potential investment and the availability of labour in the labour market will
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definitely influence choice of investment. No investor should neglect this at the planning stage of any investment for it to succeed. The citing of your investment is very paramount in the realization of your investment objectives. So many factors could influence the choice where a business may be situated. Such factors may be nearness to market, nearness to source of raw materials, availability of social amenities etc. Investment must be strategically cited after due consideration of relevant factors. This is necessary to enable it harness all social and environmental factors to it advantage. There is no investment that is intended to remain stagnant. Every investor both actual and potential hopes for expansion in investment. Business expansion does not come by accident. It comes through strategic planning. Business expansion comes with additional needs and challenges which must be properly managed. A single investor may be able to manage a small business which may not be possible when it is expanded. The accounting and control system required by an expanded business may be more complex than that of a small business. However, adequate planning from the onset may minimize the scale and complexity of the problems of expansion. Expansion, therefore, should be adequately planned for. Capital is a very important aspect of investment. It is both required for start-up and expansion of every business. The availability of capital has been blamed by many as the limiting factor to satisfying their investment interest. However, it may not always be correct to associate failure to invest or expand on lack of capital. This is because a good business plan attracts the required capital. It may then be correct to say that a poor business plan dispel capital. Nobody may want to invest in your organization or share your idea if you personally do not believe in it. Your idea must reflect in your passion to achieve result for others to believe you. You need to first commit the little capital you have to demonstrate your confidence in the success. Most big business today started small. It must be noted that poor business plan results in waste of scarce resources. Therefore, the need for capital may be met by the quality of business plan. The life style and public perception of the investor are also important in determining the willingness of

other investor in making their resources available. Integrity gives business character and distinguishes it from others. Business sustainability is the assumption underlying every investment. This is what is referred to as the going concern assumption. The realization of this assumption is dependent on how well the organization is managed and not on the amount of the initial capital invested. Therefore, business sustainability depends on the quality of business plan both at the initial stage and on a continuous basis in the investment life span. Investment must be maintained to be sustainable. Sustainability is associated with profitability. Capital is maintained when the business is making profit. When all these and other factors are fully considered before commencing a business, it is more likely that the business may experience fewer obstacles. Better still; a potential investor becomes aware of possible hindrances before they occur. This would make the investor better prepared to achieve the investment objectives.