If you have some capital you'd like to use in helping a business get off the ground, you may be thinking about investing some of it. Whether you are investing in a large or small business, start-up or established, you'll need to do proper research so that you can make an educated decision on your investment, and know what type of return you can expect. Some investors never recover their money, so make sure you're willing to take the risk.
Research the history of the business. You should know basic components, such as when the business began, what its primary function was and how it has fared since. Also do some background research on the business' managing officers and their history with other companies. This can help you make a sound investment based on the business' track record.
Ask for records, if you can. If it is a small business, you may be able to ask up front about the records and see copies of the bookkeeping so you can get insight into the running of the company and organization, as well its success. If it is a larger business, look up recent press releases on earnings and losses so that you know the company's direction.
Analyze the market on your own. Decide whether it is a good time to invest in a business. For a large corporation, even if its sales are down, investments that have good research to back them up are fairly sound. However, some smaller businesses and start-ups may need to wait for more stable economic times before you invest in them.
Take a moment to look at what the best-case scenario and worst-case scenarios would be. For instance, if your best-case scenario is to have a 30 percent return on your investment, speak to the owner of the business about the likelihood of that happening. If the worst-case scenario, such as losing all of your money, is something you can handle, you may be willing to invest no matter what the odds are.
Approach the owner of a small business to indicate you are willing to invest. Talk about what your investment will earn you, such as a stake in the company, a residual income or some managerial control. If it is a large, publicly traded corporation, ask your stockbroker to purchase some of its stock. It is a less personal approach, but may net you greater financial rewards.
- Photo Credit lusi: sxc.hu
- Small Business Investment Agreement
Reasons to Invest in a Company
Your decision regarding a potential investment in a company should be made within the context of your long-term investing needs. Consider how...
- How to Invest in a Business
How to Invest in a Personal Business from a 401k
Most people are unaware that investing in a personal business is possible with funds from their 401(k). While uncommon, it can be...
- How to Invest in a Startup Company