|
|
|
After I’m gone … Selling Your Small Business
If you’re considering selling your business, you have a vested interest in continuing the success of the business as your participation lessens. Many factors determine how your enterprise has succeeded until now. One particularly important factor...
How Small Businesses Build a Customer Base
Building a solid customer base is a necessity of any small business. Often times these smaller businesses cannot compete effectively with larger companies in terms of resources. For example, Tom’s mini-Mart is not going to be a match for Farmer...
How Yahoo's Recent Facelift Can Mean More Traffic To Your Site
It even surprised me.
Yes, even though I have been pointing out the possibility since July, and was forced by demand to release my study findings before my book was even half finished, I was shocked when I heard the news as well.
You...
Promotions That Build Profit
Promotions are everything you do to let your customers know you exist. Good marketing techniques can help eliminate the “I didn't knows” from your clients and would-be clients. Even if you believe you have more than enough business you should...
Selling To Your Difficult Person
We all have people whom we find difficult. We don't understand them, connect with them, or even talk comfortably with them. But, when we own a one person business, seeing someone as difficult gets in the way of our selling effectively and their...
|
|
| |
|
|
|
|
|
|
Small business investments
State laws have been relaxed to make it easier for small business to raise start-up and growth financing from the public. Many investors view this as an opportunity to “get in on the ground floor” of an emerging business and to “hit it big” as the small businesses grow into large ones.
Statistically, most small businesses fail within the first few years. Small business investments are among the most risky that investors can make. This guide suggests factors to consider for determining whether you should make a small business investment.
Risks and investment strategy
A basic principle of investing in a small business is: Never make small business investments that you cannot afford to lose! Never use funds that may be needed for other purposes, such as college education, retirement, loan repayment, or medical expenses.
Instead, use funds that would otherwise be used for a consumer purchase, such as a vacation or a down payment on a boat or a new car.
Above all, never let a commissioned securities salesperson or office or directors of a company convince you that the investment is not risky. Small business investments are generally hard to convert to cash (illiquid), even though the securities may technically be freely transferable. Thus, you will usually be unable to sell your securities if the company takes a turn for the worse.
In addition, just because the state has registered the offering does not mean that the particular investment will be successful. The state does not evaluate or endorse any investments. If anyone suggests otherwise, they are breaking the law.
If you plan to invest a large amount of money in a small business, you should consider investing smaller amounts in several small businesses. A few highly successful investments can offset the unsuccessful ones. However, even when using this strategy, only invest money you can afford to lose.
Analyzing the investment
Although there is no magic formula for making successful investment decisions, certain factors are considered important by professional venture investors. Some questions to consider are:
ØHow long has the company been in business? If it is a start-up or has only a brief operating history, are you being asked to pay more than the shares are worth?
ØConsider whether management is dealing unfairly with investors by taking salaries or other benefits that are too large in view of the company’s stage of development, or by retaining an inordinate amount of equity stock of the company compared with the amount investors will receive. For example, is the public putting up 80 percent of the money but only receiving 10 percent of the company shares?
ØHow much experience does management have in the
industry and in a small business? How successful were the managers in previous businesses?
ØDo you know enough about the industry to be able to evaluate the company and to make a wise investment?
ØDoes the company have a realistic marketing plan and do they have the resources to market the product or service successfully?
ØHow or when will you get a return on your investment?
Making money on your investment
The two classic methods of making money on an investment in a small business are resale of stock in the public securities markets following a public offering, and receiving cash or marketable securities in a merger or other acquisition of the company.
If the company is not likely to go public or be sold out within a reasonable time (i.e., a family-owned or closely held corporation), it may not be a good investment for you – despite its prospects for success – because of the lack of opportunity to cash in on the investment. Management of a successful private company may receive a good return indefinitely through salaries and bonuses, but it is unlikely that there will be profits sufficient to pay dividends in proportion with the risk of the investment.
Other suggestions
Investors must be provided with a disclosure document – a prospectus – before making a final decision to invest. You need to read this material before investing.
Even the best small business venture offerings are highly risky. If you have a nagging sense of doubt, there is probably a good reason for it. Good investments are based on sound business criteria and not emotions. If you are not entirely comfortable, the best approach is usually not to invest. There will be many other opportunities. Do not let a securities salesperson pressure you into making a decision.
It is generally a good idea to see management of the company face-to-face to size them up. Focus on experience and record of accomplishment rather than a smooth sales presentation. If possible, take a sophisticated businessperson with you to help in your analysis. Beware of any information that differs from, or is not included in the disclosure document. All significant information is required by law to be in the disclosure document. Immediately report any problems to your state Office of the Commissioner of Securities.
Conclusion
Greater numbers of public investors are “getting on the ground floor” by investing in small businesses. When successful, these enterprises enhance the economy and provide jobs. They can also provide new investment opportunities, but the advantages must be balanced against the risky nature of small business investments.
About the Author
Larry Westfall is the owner of DIY Investing - http://www.pennystockebook.com
|
|
|
|
|
| United States Small Business Administration |
| An electronic gateway of procurement information for and about small businesses. Search engine for contracting officers, marketing tool for small firms, ... |
| www.sba.gov |
|
| SBA |
| The Small Business Planner includes information and resources that will help you at any stage of the business lifecycle. ... |
| www.sba.gov |
|
| Main Page - SmallBusiness.com - Small Business Resources |
| Find Small Business plans, advice, tutorials about organization, corporations, entrepreneurship, and smallbusiness. |
| www.smallbusiness.com |
|
| Yahoo! Small Business: Domain Names, Web Hosting, E-commerce ... |
| Yahoo! Small Business provides products and services that enable you to establish and grow your business on the Internet. Services include domain name ... |
| smallbusiness.yahoo.com |
|
| Small business advice business start up small business finance ... |
| business start up small business finance start up advice. |
| www.smallbusiness.co.uk |
|
| Smallbusiness.gov.au redirect to business.gov.au |
| Business Entry Point - Helping small business in big ways. An Australian Government initiative. The content from this website has now been consolidated into ... |
| www.smallbusiness.gov.au |
|
| Business & Small Business |
| Online and print small business publication. Information to help start, grow or manage a small business. |
| www.entrepreneur.com |
|
| Microsoft Small Business Center |
| Your home for information about Microsoft's small-business products and services, tailored business advice, technology tools, and more. |
| www.microsoft.com |
|
| The Small Business Advisor - advice for starting and operating a ... |
| Advice and assistance for starting and operating a small or home based business. |
| www.isquare.com |
|
| SCORE "Counselors to America's Small Business" |
| A nonprofit association dedicated to encouraging the formation, growth, and success of small business nationwide through counseling and mentor programs. |
| www.score.org |
|
| Small Business and Self-Employed One-Stop Resource |
| IR-2006-2, January 3, 2006 - Temporary and proposed regulations will significantly reduce tax filing burden for nearly 950000 small business owners. ... |
| www.irs.gov |
|
| Welcome to Small Business BC your business resource in British ... |
| BC Business Services offers assistance and resources for those running or starting a business in British Columbia and Vancouver. |
| www.smallbusinessbc.ca |
|
| Small Business Service | Home |
| Provides information and advice to help small businesses realise their potential. |
| www.sbs.gov.uk |
|
| NSW Small Business |
| A site developed by the NSW Department of State and Regional Development for small businesses. Topics include management, resources, current issues and ... |
| www.smallbiz.nsw.gov.au |
|
| Business Management & Advice: Small Business Resources & Information |
| Looking for business management and advice? Our website includes small business resources and information that can help you. Visit the small business ... |
| www.businessweek.com |
|
| Small Business Lawyer, Attorney, Law, Legal Help - FindLaw for ... |
| Information and legal sites relevant to small business. |
| smallbusiness.findlaw.com |
|
| Small Business Funding Opportunities (SBIR and STTR) |
| Links to Small Business Funding Opportunities and SBIR / STTR Applications. |
| grants.nih.gov |
|
| Microsoft bCentral Small Business Directory |
| Directory categorized by industry with company business card feature. |
| sbd.bcentral.com |
|
| Our site has moved! Please update your bookmarks! |
| Facilitates the sharing and exchange of information among small business development centers, the small business administration and other business-oriented ... |
| sbdcnet.utsa.edu |
|
| Small Business Development Corporation |
| Our business information services provides guidance to improve business skills and knowledge on advice on starting, buying, selling and expanding a small ... |
| www.sbdc.com.au |
|
|