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Thinking of investing in a business? Read on to find out about some of the essential things to think about first.
They say fortune favours the bold, but it may just be that ‘the bold’ are those who do their research and turn to the right people for advice. Pivotal business decisions may look bold from the outside but, from the inside, there are plenty of ducks in a neat and orderly row.
Investing in a business is one of the most pivotal moves you can make, so how do you make sure you’ve got all the details under control before you sign on the dotted line? Here are three things that will help you to ensure you make a strong decision.
- Research is everything
It sounds obvious, but your ability to recognise the importance of research really can make or break your decision to invest. Often, the most ‘basic’ and obvious items on that mental ‘To Do’ list are the easiest to overlook, simply by virtue of how basic they are.
You’ll want to research the company itself, its market, and how it has been managed up to this point. You’re not necessarily looking for any one particular thing, but you are looking to see a whole, comprehensive picture of the business – not just a single snapshot.
You want to appraise the team itself. What is their dynamic? Are they ready to adapt to change, to grow and develop individually and as a collective? Do they really understand the market, or has training been overlooked in the interests of just ‘getting the job done’?
And, of course, the first thing that any seasoned investor will want to look at: the financial projections. You’re not just looking to see what your financial return will be – and how long it will take to get it. You’re going to want to use those projections to determine the plan for the next five years, and to determine whether or not the business is scalable.
You’re also going to want to look for any potential flaws in the way the business’ projections have been put together. It’s not just about reading the material, but scrutinising it for errors or over-optimism.
- A Second Opinion is Essential
This isn’t a decision you want to make on your own. However experienced, passionate or ready you feel, you’re still only able to look at the situation from one perspective. Nobody ever reaches a point where they no longer stand to benefit from the professional expertise of people viewing the situation from a slightly different angle or background.
When you’re considering investing in a business, one of the first people you should get on-side is a solicitor with specific experience in guiding investors through the process. Corporate solicitors are used to taking in the full picture, scrutinising the small details, filling in the gaps in your knowledge, ensuring that the legalities are watertight, and offering as much protection to you as they can. You can click here to find out more about working with corporate solicitors.
- What Can You Contribute?
The obvious answer to this question is ‘capital’ – something that can totally transform a business when the right investor steps in. But that’s just it – it can prove transformative, provided the right investor stands behind it.
To that end, what can you contribute to this business besides money alone? An investment like this can look incredibly strong on paper but, if your gut is telling you that you’re not a strong match for the business itself – that you could get bored or frustrated, or not have the right credentials to offer a really valuable new perspective on the company – then maybe this one isn’t right for you.
