A client recently asked about a business investment opportunity. My advice is always the same… before you make an investment, ask and answer the following questions:
1. Can I afford to lose the investment?
Determine whether you can absorb the risk of the investment. In other words, if you invest $10,000, will it be a problem? There is a difference between “wow, I lost $10,000, that stinks” and “wow, I lost $10,000, how will I pay for the kid’s college education?” You never want to put at risk an amount you cannot afford to lose. This is an old cliché, however, it remains appropriate.
2. Do I know the business or person involved in the business?
Never invest in a business venture without doing your due diligence – analyze not only the business opportunity, but run a background check on the individuals involved in the business. For example, if any of the key individuals have declared bankruptcy or been sued for breach of contract, think twice about investing with such persons.
3. Does it put my core business investment at risk?
Never forget to respect the “core.” Traditionally, the “core” is the closely held business that pays the bills. However, it can easily be the salary earned by you as an employee. People grow comfortable and forget how hard it was to reach that level of success. Maintaining that comfort takes effort, do not take it for granted.
Everyone wants to make more money and nothing is more appealing than investing in a business venture that does not involve us working to make the money, aka “sweat equity.” However, remember that such opportunity involves risk.
Disclaimer:
This information does not constitute the rendering of legal, accounting or other professional services by Pete Benenati or Benenati Law Firm, PC. This information is not intended to create or provide an attorney-client relationship. Although care is taken to present the material accurately, any implied or actual warranties as to any materials herein are hereby disclaimed along with any liability with respect thereto.