What to Consider Before Investing in a New Business Venture

    We are often presented with investment opportunities around every corner. There are plenty of opportunities just within personal circles of friends and family, and then there are endless opportunities thanks to the several platforms that exist to raise funding.

    If you are interested in becoming an investor there are many options, and there are really no limitations in terms of capital requirements. There are large opportunities that will give you a nice chunk of equity for large-scale investments, and then there are opportunities via crowdfunding platforms that will give you a very small pieced to get your toes wet.

    But, no matter how much money you are investing you need to ask yourself some questions, starting with these.

    What is the time required vs potential payoff?

    Some investment opportunities are capital only, but some involve time. If a company is seeking you for not only capital, but also your experience or connections then you really need to think hard about the time commitment that is going to be required to be successful.

    “Sometimes your time and effort would be better spent on your own ventures rather than giving it to someone else when the potential return is small, especially when it comes to online businesses that require a lot of effort in the early stages,” says Oliver James, CEO of Perth Web Design. “Your time is your most valuable asset so be careful where you give it. If an investment requires a lot of time it may not be worth it in the long run.”

    Can you afford to lose the investment?

    There is a risk associated with every investment, no matter how good of an idea it is. There is never a sure thing or a guarantee that your money will be secure. There are countless times where a company has folded quickly because the funding was mismanaged and certain things were done poorly.

    “You should only invest money that you can afford to lose,” suggests Andrew Tran of therapyblanket.com.au. “Of course you never want to think about losing money, but more businesses fail than succeed, and that is a stat that you really need to be fully aware of.”

    Nobody is going to tell you this because they think their idea will work. Hopefully it does, but you have to be prepared for the worst-case scenario. If you cannot afford to lose the money do not invest.

    Could the investment money be used for your own business?

    What if you took the money you were going to invest in an opportunity and instead you put it back into your own business or used it to launch another business? Sometimes if you take this approach it will be a much bigger return down the line.

    “You should always bet on yourself rather than other people,” offers Chris Moberg of Slumber Search. “Why? Because nobody will ever work harder for your money than you will. If you have a business currently think about what you could use that money for and how it would pay off in terms of additional revenue each year.”

    You will often realize that there is an opportunity to invest in yourself rather than someone else. Think of it as self-investment. You will work harder knowing you are invested in your own business.

    Are you investing in the person or the idea?

    When you are evaluating a business opportunity for investment, you need to ask yourself whether you are investing in the actual business or the person behind it. It’s often wiser to invest in the person, as they are the deciding factor when it comes to success.

    “Has the person built a successful business in the past? Do they have the work ethic and experience to carry out the vision?,” are questions Pat Skinner of answerfirst.com suggests focusing on. “Everyone has ideas, but not everyone has what it takes to make those ideas successful.”

    A great idea with the wrong person behind it will fail every time. Don’t let a great idea get you to part with your money. Only invest when you are confident that the person behind the idea is qualified to carry out the vision and plan.

    Is it something you want to put your name on?

    When you invest in a business you are giving it your personal stamp of approval. For example, if you invested in a cannabis farm operation it could have a negative impact on your other business ventures. While perfectly legal, you just have to be aware that any involvement is usually public.

    The same would apply to any situation where there is a potential conflict of interest. “Imagine if you owned a driving school that educated and instructs teens on how to properly operate a motor vehicle,” starts Darryl Howard of Blogger Tips. “If you invested in a local bar it might cause some uproar that could have a negative impact. These are all things to consider, especially in today’s internet age, where people are quick to be vocal.”

    Are you liable in the event of financial or legal issues?

    What happens if you invest in a product that ends up killing someone or is sued via a class action lawsuit. What is your liability? Are you protected? Can they come after you personally? If you invest in a blog like Merkur and one of its affiliate or advertiser offers causes harm, then is the site liable? You always want to get expert opinions from lawyers that can help guide you.

    “When investing you always want to get the opinion and help of a legal expert,” advises Pedro Del Nero of Vaporizer Vendor. “You never want to think negatively, but you have to always be prepared and protected from the worst possible outcome.” Imagine if you were liable and simply investing in a company caused you to lose everything you have worked so hard for?

    Paying a lawyer to check everything over before you sign on and invest your hard-earned money is always wise. It can save you a lot of time and headaches in the future, so take the time to properly evaluate every opportunity, no matter how lucrative it might appear on the surface.