Business investment has been and continues to be a great opportunity. However, it is associated with negative stories like investment fraud. Therefore, you need to be cautious before putting money into a company.
Below are four questions to ask any business you want to invest in:
1. How is the management team?
The management team of a business is integral in determining its success. Thus, before investing in a company, meet with the founder(s) and key team members. Learn about their skills and experience in the specific business, their communication skills, plans to grow the business and so forth.
You want to invest in a company with a great management team – a team you can work with.
2. How is the competition?
You should know the available market that the business can capture. Investing in a company in a highly competitive industry may be challenging, as it may not have a significant percentage of the market to tap into.
3. What is its competitive advantage?
If the business you want to invest in is in a highly competitive industry, ask about its competitive advantage. Its product or service may have a unique angle that hasn’t been implemented by competitors.
4. What is its financial position?
If you are investing in a start-up, it may not have enough financial statements/data to examine its financial position. Hence, you may need to use other details to learn about this aspect, such as the management team’s understanding of the business’s financial and key metrics.
However, if the company has been in operation, ask for financial reports, preferably for the last three years, to make an informed decision.
It’s crucial to obtain more information about a business before investing in it. These are a few examples of the questions to ask. You should also consider legal help to protect your investment.
