For anyone seeking to invest into a company or small business, there are some things to look out for. Learning what these vital signs of a healthy business opportunity can save you a lot of money – and give you a significant return on your investment.
Not everything is an incredible opportunity for investment, no matter how much of a beautiful picture is painted by the pitch. And these key indicators can help you spot potential rather than fritter your money away on a dud. Let’s take a closer look at everything an investor needs to know before putting money into a business.
Long-term lifespan
Of course, every new business owner out there thinks that their special idea is going to stick – and stick around for years to come, too. However, investors cannot afford to be so optimistic. The simple truth is that the vast majority of businesses fail within 18-24 months, and if that is your money going down the pan, you are going to feel it more than most. So, consider the following questions before making your investment. Do you see yourself investing in this company for the next ten years? And, do you feel that the firm has enough behind it to last ten years? Always play the long game when it comes to investing bin business and you will get the steady rewards you deserve.
A simple business model
As an investor, it is unwise to put your money anywhere that you don’t understand,. You have to ensure the founders have a straightforward and easy-to-understand business model that you can grasp in an instant. Any complications or difficult concept explanations are likely to end in tears. Keep it simple, and your investment target will probably be easier to sell to the market.
Company culture
Company culture is becoming increasingly important for modern businesses, so ensure this is on your checklist. A company that invests in its people, either with education or performance management, is key to its success. Businesses that operate this kind of employee development tend to enjoy higher productivity and more innovation than those that don’t.
A solid start
It goes without saying that a company that is already growing is a wiser investment than one that is struggling to get off the ground at all. Good profits, solid management, and a robust plan of action will all contribute to a business getting itself in a good position. Avoid companies that are seeming to be waiting around for investment or raise more cash – they are all too common and don’t show either the desire or skills to make things happen.
A market with potential
Sometimes you will come across companies that have fantastic ideas – so much so that they inspire you to invest. But without rigorous checking of the market, how can you tell it will be a success? Is there a genuine need and desire for the product, and what is the potential cap on the market? All these things – and a lot more – should give you an idea of whether or not you can afford to invest your money in business.
