Business Funding
Business Investing Information
The following business investing information outlines the three main areas you need to consider when evaluating potential business investment opportunities.
Fully Evaluate The Investment Opportunity
This may sound obvious but it is vital that you thoroughly evaluate the business investment opportunity itself before committing your resources.
- Establish an expected return on investment figure, try and make this as accurate as possible and identify the payback period for the investment. If possible you should discuss the project with other potential investors and find out how long the opportunity has been available for.
- Make sure you understand the financial plan and that you agree with the assumptions and projections made. If you are unsure of this, find out if independent professional advisers have reviewed the situation.
- You should be comfortable with their proposed marketing plan and believe that it will be effective. Strong marketing can be the difference between you making a profit on your investment or suffering a loss.
- It is important to know when the business is expected to break even and what form the return on your investment will take. If you are buying equity in the company you should know what type of shares you are purchasing and if there are any warrants or share options attached.
- If you are purchasing debt it is important to know if it is subordinated or convertible debt.
Access The Risks Of The Investment
Knowing exactly what the risks are can help you make the right decision on a business investment.
- You should always work out exactly how much you could lose on an investment and assess the likelihood of failure. When the investment is in a new product or process, seek independent evidence that it actually works. Also, find out if there are any regulatory requirements that need to be met and ensure that they are.
- Make sure you ask exactly where the invested money is going to be spent. If the business is currently operational find out if it is loosing money and if so, how much.
- Before you begin a business investment work out if the founders of the company have invested enough cash in to the project. Find out how involved they expect you to be and if you are going to be on the board of directors see if you are entitled to remuneration.
- You should always be sure where you stand legally with any new investment, if you are not sure then seek professional advice. This includes knowing if you could be legally bound to invest further sums in the future.
- Find out if any of your potential investment is secured by assets. Make sure these assets are fully insured if necessary and check to see if the business is up to date with all it's tax responsibilities.
Evaluate The People Behind The Investment
Once you have established that all the facts and figures relating to a business investment are sound, it is important to check out the people who will be using your money.
- It is best to get to know the management personnel well enough to trust them before you commit your cash. If this is not possible, try to confirm their reputations with a credible third party.
- You should find out how the investment advisers are being paid and look into the contract and salary agreements of all key personnel.
- It can be useful to find out about the history of the main implementers of the business plan. You may also want to learn about the reputations of other important people such as shareholders, officers and directors.
- If you have any doubt surrounding the key personnel involved in a business investment it may be worth retaining the services of a lawyer to run both corporate and personal searches on their backgrounds.
Following the guidelines set out here will not guarantee you a positive return on your investments but it will certainly give you a fighting chance to turn a profit.
If you require any further business investing information, including investment strategy advice, please contact us today.
Other useful business investing resources:
The Chairman of Strategy Consulting Limited, John Courtney, is also an Associate Director of Beer & Partners, (Registered Office: Painter´s Hall, 9 Little Trinity Lane, London, EC4V 2AD). Beer & Partners is authorised and regulated by the Financial Services Authority.
This communication has been approved by Beer & Partners as a financial promotion. Beer & Partners is authorised and regulated by the Financial Services Authority. Investment in unquoted businesses carries high risks as well as the possibility of high rewards and an investors´ capital is at risk in making such investments. It is highly speculative and potential investors should be aware that no established market exists for the trading of shares in private companies. Please note that any tax treatments referred to in financial promotions approved or issued by Beer & Partners will depend on the individual circumstances of the investor. All of Beer & Partners´ fees are payable by the client companies to whom it provides services, investors are treated as retail clients being recipients of Beer & Partners´ financial promotions.
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