The surging popularity of social media platforms like Facebook and Instagram gave entrepreneur Norman Yeo the confidence that his business idea could well be a winner.
Mr Yeo set up media agency Tangy Lab in 2015 to help organisations with their presence on such social media platforms. The firm implements strategies that improve sales for companies through digital marketing.
Mr Yeo, 30, started his business with a capital of only $1,000 and managed to break even within the first four months. Last year, he racked up revenue of almost $500,000, with estimates that it will hit $700,000 this year.
"My passion is in running a business. I had experience working in a digital marketing firm, and I realised that every business required some form of marketing," he says.
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Mr Yeo, a graduate in business administration from the National University of Singapore, puts his investment mindset to use in his business.
"Just like investing, I wanted a lower-risk approach to managing my business. I kept all expenses variable, giving the firm stability when we first started operating," he adds.
Worst and best bets
Q What has been your best investment move?
A My best investment was in stocks. It is a delight to receive dividends, and it is a good form of passive income.
My stock investments have generally been good decisions so far. For those that didn't work out well, I was quick to sell the stocks.
One of the stock investments where I earned the most was my BreadTalk stocks. The capital appreciation was strong.
I had chosen to invest in BreadTalk as the company managed to handle its finances well while undergoing aggressive expansion, from 23 stores to more than 400 stores in just five years.
Having positive cash flow even amid expansion is a good indicator of positive management.
Also, I felt that BreadTalk had a fair valuation and thus it was the right time to buy its stocks.
Q What has been your biggest investing mistake?
A When I was about 20, being young and adventurous, I made some alternative investments that caused me a huge loss.
I had invested in gold from a local company selling overseas bonds, as there was much hype over it and the seller was my friend.
I initially invested $4,000 and made $20,000. This motivated me to invest another $10,000 in another product from the same firm, but I ended up losing all $10,000.
That made me realise that investments should not be about luck, but done in a more calculated way.
I was ignorant and overly ambitious, and I am glad to have had this learning experience.
What the firm promised was 2 per cent cash per month compounded and 24 per cent returns per year.
As the age-old adage goes, if it's too good to be true, it probably isn't true. I have learnt that I must be able to clearly articulate how the company is generating returns for investors before investing in it.
For investments, there is an abundance of opportunities. Even if an opportunity is lost, there will always be other opportunities, hence we should always be more careful.
"After getting many referrals from satisfied clients, I slowly turned my variable expenses into fixed expenses, such as for hiring. Within two years, we became close to a million-dollar firm."
Beyond running a business, Mr Yeo is also a trainer who teaches entrepreneurs how to effectively use Facebook as a marketing tool.
He is looking to expand his firm in Malaysia next year.
"For the next few years, I am keen on building an ecosystem of small businesses around my marketing agency," says Mr Yeo. "I plan to acquire businesses that require our digital marketing services.
"This will allow us to grow much faster as one whole entity."
Q Moneywise, what were your early years like?
A I have a humble background. When my parents first started their business as a cleaning contractor for buildings, most of their profits were channelled into it. However, their wise investment decisions in property and stocks managed to provide for me and my brother. This was a key inspiration for me to invest and start my own business.
Q How did you get interested in investing?
A Apart from my parents' influence, a key trigger was when I discovered the concept of passive income - to invest in assets that provide cash flow beyond expenses - at 19. I first tried investing when I was in the army but started to invest seriously in stocks and equity only when I was 24, after exploring various investment engines to learn how to build passive income.
Q Describe your investing strategy.
A I invest when I see good opportunities, but I don't actively seek investment options. I believe in long-term investments.
I have invested close to $200,000 in the last seven years. My preferred strategy is value investing - buying equity based on business fundamentals.
Hard work is required before investing in a firm. We analyse its track record, financial statements and business model. I take about six to eight hours to study one firm.
I mainly depend on qualitative factors: a business model's potential, the firm's expansion direction and its credibility.
I observe company financials to see if the firm is generating value for shareholders. I keep an eye on return on investment, return on equity and return on assets. I focus on cash flow, dividend yield and capital appreciation.
Then I simply monitor it occasionally, spending half to an hour every two to three weeks on monitoring.
This allows me to focus on my firm while my money continues to work for me.
I use ShareInvestor to observe market trends. The key tool I use is the firm's annual report.
I observe the firm's liquidity and current ratio. I look out for its cash flow statement to gauge its long-term stability. I find patterns on outstanding income or surprise income to see if the growth only lasts a short period of time.
I also invest in property, which gives me more control. While more effort is needed to maintain a property, one receives actual cash flow from tenants when it is rented out.
I mainly use qualitative metrics - quality of the neighbourhood and growth prospects of the area.
Q What's in your portfolio?
A My portfolio is worth $100,000. It consists of 10 per cent private equity, 40 per cent stocks and 50 per cent property and land investment.
For private equity, in early 2016, I invested $20,000 in a local tech start-up that relocated to Shanghai to pursue the Chinese market.
While private equity investment has higher risks, it was a firm I have been working with, and I believe it has a positive trajectory.
I have also invested heavily in five different types of stocks. Most are giving me 8 to 10 per cent dividends.
I invested in BreadTalk in October 2012. I bought 15,000 units at 59 cents each.
I had analysed its expansion plans and strategies to stabilise the firm. It also had strong cash flow and financials.
Its price now is $1.53 and the dividend is 72 cents. The annualised returns are 22 per cent.
I bought 5,000 units of CapitaLand Commercial Trust at $1.425 each in July 2015.
I had bought it after evaluating the individual units within the trust. The occupancy rate was high and the trust had a strong vision.
It is worth $1.64 now, and the dividend is 17.7 cents. The annualised returns are around 12.8 per cent.
I bought land in Geraldton, Western Australia, about 18 months ago at $125,000, with a five-year option at 10 per cent of its value. While land investments do not give much cash flow, Geraldton has a huge development plan and good prospects.
Around the same time, I invested in a property at Jalan Ampang in Kuala Lumpur with a friend for RM980,000. We are collecting rent of RM2,500 (S$800) on a monthly basis.
I also invested in a hotel unit in Johor Baru less than a year ago. It is a developing four-star hotel in Iskandar. It is in a good location as the upcoming KL-Singapore high-speed rail will be near the hotel.
I have not sold my properties yet.
Q What does money mean to you?
A It represents options. The more money you have, the more options you have in life. Not all options are required, but I definitely want to be able to lead a life with more options for my family's future and myself.
Q What is the most extravagant thing you have done?
A Buying business class tickets to South Korea from Singapore Airlines for me and my girlfriend!
Q Tell me about your immediate investment plans.
A My business is the best form of investment. I invest most of my money in my business - this will definitely yield the highest returns compared with other investment assets.
With my spare cash, I will invest in stocks or properties.
I have a network of business owners who are well informed about market opportunities. They often recommend to me investment deals which I may further explore.
Q What are your retirement plans?
A Retirement without purpose can be a misery. I am unsure if I will want to retire, but I want to have the choice to do so. I want to have passive income that allows me to retire and have a secured life for my future wife and children.
Q Home is/I drive...
A I live with my parents in a five-bedroom Housing Board flat in the west. I drive a 1.4cc Fiat Punto.