Investing in a business is a daunting decision. Whether you are investing in a new or established enterprise, there will always be risk involved. The best way to mitigate these risks is to gather as much information as possible on the enterprise you wish to invest in.
But how do you go about gathering this valuable information?
During the basic evaluation, you should determine if the entity is trading in an industry that you wish to align yourself with, whether you have experience with the product or service provided and the current economic environment.
At this point, it is good practice to appoint an independent advisor that can assist with the negotiations and even act as a mediator to ensure that all parties are heard. This way the parties become familiar with one another and you gain insight into the basic operations and management of the entity.
During the due diligence, a detailed evaluation of the company’s records will have to be performed.
Since there is a vast amount of documentation to consider, some of the core information that should be requested and considered is:
Through the above information, you will be able to determine the profitability and growth opportunity of the entity.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)