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Top tips for new business investors

Monday, 2 May 2016

Investing in a business is a great way to increase the return on your savings but it is also risky and without the correct preparation you could lose all of the investment. You should also pay particular attention to how you can invest in businesses as there are many options and variables that could affect your decisions. If you are interested in business investing, the following tips should hopefully help you make decisive decisions.

Don’t gamble
It is vital that you research the business you are interested in to evaluate how successful the business is likely to be and whatever you do, do not make snap decisions. There are several aspects of a business that you should look into. The first should be the size of the market for the product or service the company is offering. You need to ensure that the market is big enough for the company to grow sufficiently to see a return on your investment. Your next challenge is to appraise the managers of the business to ensure the company has the right people to drive the business forward.

Get the investment deal right
If your research is encouraging, you should now decide how much you are willing to invest and how much you would like in equity shares as a return for your investment. Evaluate how much the business is asking for against how much you think they need to reach the next stage of growth. If you come to the conclusion that the company is asking for a realistic and well calculated investment, you may be more inclined to invest. When deciding how to pitch the amount of equity shares to the company you should carefully balance the risk involved against how much capital you are investing and how much experience you will be able to provide the company. An investor will typically ask for an equity share of 15% to 30% but may want to ask for more or less.

Take advantage of Government investment schemes
During your investment decision making process you should strongly consider whether you would benefit from any of the available government investment schemes. These schemes are worth exploring because there are tax relief incentives. The Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCT) were introduced to encourage wealthy individuals to invest in unlisted and start-up businesses.

Protect your investment
Once you are sure you want to invest in a business you should enlist the assistance of a specialist business investment team. The investment team at Rollingsons are experienced with negotiating investment agreements and can ensure that your investment is legally protected through business ownership. We do not give generic investment advice, but instead give legal advice on the rights and responsibilities or investors and investees. For more information or to arrange an initial consultation, please contact us on 0207 7611 4848.

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