4 Questions to Ask Before Investing in a New Business

When you are planning on investing in a business, what do you look for? There are many different aspects to consider beyond just the company’s stock price or revenue last quarter. Broad overview questions are often the most useful in deciding if whether or not a business is something that you think will remain profitable in the long-term. Below are 4 questions to ask before investing in a new business. 

1: What is unique about this business?

This allows you to determine why the business exists in the first place and what problem in society it solves. Look at why the company has survived when others haven’t and why it is other similar firms have not replaced it. Looking forward is also important, does the company have room in the market for growth? Where will further expansion take it?

2: What product or service does the company offer consumers?

Why is this product or service appealing to customers? When determining this, consider what other products are already on the market and how this one differentiates itself. In the long-term you will want to consider if there is upcoming innovation that could make the product irrelevant and what the risk of that might be.

3: What are its liabilities, risks, and debts?

Looking into what could go wrong is a way to stay safe with your investment. Financials aren’t everything but glaring weaknesses should not be ignored. Does the company have too much debt? Does it have pending legal cases? Looking at what will come due once you have made your investment and how that will affect the business is just as important as looking at what has already been spent beforehand.

4: What are the company’s assets, revenues, and reputation?

Examine where the value of the company lies. For example if it is a retailer or business that carries a lot of inventory and warehouse space, you will want to take that into consideration. The rate at which the company pays off debt, pays out dividends, and fuels expansions will be crucial in getting a return on your investment.

For more information about business law, contact the Goosmann Law Firm at info@goosmannlaw.com or call (712) 226-4000.