So you found yourself with some money laying around and you want to make the most of it? Maybe you’ve just gotten your taxes back or maybe you’ve been saving for quite some time. Either way, investing it in a business could seem like a great opportunity or a giant risk. Investing in a business can have huge risks or huge rewards, which can seem daunting. So we’ve compiled this list to help you navigate the turbulent waters of investing in the right business. We definitely always recommend you consider the money you are investing as a right off and never invest money you would be devasted to lose. Investments always stand the risk of being lost altogether but with careful planning, we hope this won’t be the case for you.
1. Read The Business Prospectus
A company prospectus is an in-depth plan for the business as it stands and in the future. If a business is pitched to you without this important document run the other way. The business prospectus can tell you many important things like the internal structure of the company, current profits, and losses, competition in the industry, and projected growth strategy. Be sure to read this document carefully and ask any questions that may have been left out.
This might seem logical but thoroughly researching a business before investing in it can save you a lot of heartache and headache in the end. Even after you read the business prospectus a company pitching to you may be excluding a lot of key information. By doing your own research you can learn a lot about what the company may be omitting. You can also do great research by researching the competition. The competition might be able to show you some opportunities or weaknesses in the company you are researching.
3. Work With Founders With Skin In The Game
Sometimes you may come across a business that is a good idea, is doing well, and has received funding externally to get it off the ground. Now while that all might sound dandy in this situation can lead to a lot of issues. While the founders may be very passionate about the work they’re doing with no skin in the game they have nothing to lose. Entrepreneurs can be wildly passionate about something and then lose interest in a second. Knowing that they have invested their money into a company can show that they truly believe in what they’re doing and if you fail they fail as well.
4. Invest In Companies You Already Support
Companies you already support have already proven many steps that are great indicators they’re a good idea. For one, consumers believe in what they’re doing. If you already support them you can tell if they have a good product, what they’re customer service is like, and that they have a loyal customer base, to begin with.
5. Don’t Invest in Novelties
While you may not want to miss the boat on something new a trendy also be cautious that fads can go as soon as they come. Don’t look to reinvent the wheel. If you have a chance to invest in a business with a model that seems tried and true the risk may be a lot less. Look for opportunities for business that a traditional but with a twist.