This is a very applied question so I hope it's the correct adress here for it:

I'm running a small entertaining business for virtual reality experiences. Investment was about 120 k. I now build it all up and just opened a week ago. Money left is 25 k. There are two major things I would like to buy, one costs 6 k, the other 18 k (both software licences). At the moment, without any income, I can survive about one year. That's why I probably will skip the expensive one of both licences. On the other hand it is a high award winning experience and also advertised by very famous people in our nation. That's why I'm not skipping it at all in my head. The other one I guess it could fit to my finances. But anyhow, since VR is probably requested way more in winter time than in summer time I'm not sure how much profit I'll gain and if it is smart to invest into one of both.

Is there thumb of rule or even any academic method how to figure out if an investment promises to be a good decision? I'm aware that it is probably rather difficult but I'm a technician and I'm used to research anything at different methods. Hence, I believe there must be some tools to use for business purposes?


Other than the generic calculation of "Present Value", there's no rule of thumb as such. Your decision should largely depend on your knowledge of the market, your capital and other production inputs, whether the licenses are substitutes, the marginal profit each one would bring, and so forth.

If a license has an expiration date, you might want to postpone the purchase till peek season is approaching. That way, you are not cash-strapping yourself unnecessarily. Also, there is always a possibility that some substitute and more affordable software might be released (or be noticed by you) sometime soon. For instance, would you buy a license if you find an open-source equivalent elsewhere?

On the other hand, the deployment of a specialized software might take time to stabilize, whence you would need to assess whether that would disrupt business operations.

Another aspect to consider is that by spending more of your remaining --and arguably vital-- resources, you are placing "more eggs in the same basket". That type of management is discouraged unless you have the certainty that your business will be profitable.

Knowingly or not, during your decision-making you'll inherently be applying many principles of economics and finance. There is just no tool or test that gives the precise type of guidance you are seeking.

  • 1
    $\begingroup$ Thank you! It's quite hard to make a decision. At least the expensive option will probably be skipped. That's obvious :) $\endgroup$
    – Ben
    Jul 10 '18 at 13:18

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