What to look for when you want to invest in a company by geoffrey byruch

INTRO ON INVESTING• Whether you are investing in a friend’s company or in a stock of a company, it is incredibly important that you do your due diligence before making any type of comm

WHAT TO LOOK FOR WHEN YOU WANT TO

INVEST IN A COMPANY

BY GEOFFREY BYRUCH

INTRO ON INVESTING

• Whether you are investing in a friend’s company or in

a stock of a company, it is incredibly important that

you do your due diligence before making any type of commitment

• Investing in private companies is not easy

• When you buy stock or invest your own money into a company, you are not simply getting a piece of paper Rather you are becoming part owner of that company

DO YOUR HOMEWORK

• Now before you invest in

a company, it is vital that

you do your homework

• When I talk about

homework, I am talking

about the history and

financial status of the

company you are

thinking about investing

in.

DO YOUR HOMEWORK

• But what if you didn’t do your due diligence? What if you decided to

go on a whim?

• Imagine investing in stock from an unknown company All you know is that your best friend’s cousin highly recommended it

• Like anyone in finance, this is incredibly risky move

• At one end, you could be lucking out and have invested in a company whose profits grew throughout the year At the other end, you could have invested in a company that does poorly over the next few

months and lose a majority of your investment

• Don’t find yourself in that risk! DO YOUR HOMEWORK!

THE RISK

• One thing you want to keep

in mind is that there is no

such thing as a sure thing

• Investing in a private

company has many risks,

especially when you are

talking about your life

savings or long term

investments

• My best advice is to do a lot

of the work upfront to

increase your odds of

success

• Below, I have outlined a variety of topics to

research so that you can make the best well-informed decision.

RESEARCH THE CHIEF EXECUTIVE OFFICER

• The Chief Executive Officer (CEO) is the most senior corporate

administrator or executive in charge of managing the overall

organization Making sure there is a strong leader behind the company

is incredibly important

• Ask yourself various questions on whether or not the CEO is a strong

representative of the company If they are not, then do not invest If they are, then continue your research Certain questions you want to ask are:

• Do you share the same vision and goals of the CEO of the Company?

• Do you believe in the values and direction the CEO is pushing for the company?

• Does the CEO have the right experience to run the company for the next 5, 10, 20 years?

ANALYZE THE COMPANY’S

BUSINESS MODEL

• A business model is an abstract representation of an

organization The overall model should essentially break down the strategy that a company will use to maximize its profits in its industry or field

• you want to ask specific questions to make sure that the

company is going in the right direction

• In addition, research the overall company and try and find

specific trends

• this does give you the holistic view and history that your

company was in specific situation

NET INCOME, REVENUE, COST, PROFIT MARGINS

• Net Income, Revenue,

Cost, Profit Margins

• This is by far one of the

most important steps you

can take in holistically

viewing your company on

a financial basis

NET INCOME, REVENUE, COST,

PROFIT MARGINS

• Begin by analyzing this in parts Start off by analyzing the revenue

Revenue is simply the raw amount of money the company made from sales of its products or services

• Cost is the value of money that has been used up to produce the

company’s product and services This can range from main expenses

such as salary or material or miscellaneous expenses such as snacks

and office supplies

• When viewing this, you want to see that the company is utilizing its funding properly

• Looking at its annual history of its net income and profit margins will be

a sufficient amount of information to make your decision to invest

TALK TO A LAWYER OR FINANCIAL ADVISOR

• If you were still weary of

making an investment

even after doing all of this

thorough research, I

would best advise you to

seek professional

expertise on this situation

• Financial advisors or

business lawyers can help

you though the overall

financial jargon