Investing in a company
Discussion
I work as manager for a small furniture maker / retailer.
I am loving it and would like to think of it as my final job... ( I'm 31 and very settled) I have a sum I would like to invest and think it should go into the company to secure my future. The owner in winding down a bit now and looking to take a back seat.
My questions are...
Should I do it?
What would it make me, ie a share holder or should I expect to become a partner. ( Currently ltd co, with 1 shareholder )
Is there anything I should know before I offer the cash?
Many thanks, in advance.
I am loving it and would like to think of it as my final job... ( I'm 31 and very settled) I have a sum I would like to invest and think it should go into the company to secure my future. The owner in winding down a bit now and looking to take a back seat.
My questions are...
Should I do it?
What would it make me, ie a share holder or should I expect to become a partner. ( Currently ltd co, with 1 shareholder )
Is there anything I should know before I offer the cash?
Many thanks, in advance.
As a rule of thumb, companies tend to be valued at a multiple of their operating profit. However, one also has to factor in the net assets of the business.
If it's a small company, which it sounds like, the information held at Company House will be of limited value. If you're seriously thinking of buying equity in the business there's a few things to bear in mind:
1) You'd be a minority shareholder, so your investment will not be in your hands. It'll be controlled by the major shareholder.
2) Make sure most of the money you stick in will go towards the development of the business and not the other shareholder's back pocket.
3) Ask for detailed managment accounts (or whatever he's got) before you do anything.
4) Obviously I don't know much detail, but don't expect a small shareholding of a little furniture company / retailer will generate enough security to peg up the rest of your life. It probably won't be.
5) Think about the implications if you fall out (relationally) with the other shareholder.
I know the above seems a little negative, but be very careful about putting your cash in someone else's control. However, this may be the beginnings of you acquiring the entire business if the chap is knocking on a bit. He may see you as his natural successor and this may generate goodwill in terms of getting the company for a fair price.
If you do get hold of the management accounts, I'd be happy to have a look and offer some more objective advice. Buying and selling companies is my business (about one a week) so I'll be able to make some comparisons.
If it's a small company, which it sounds like, the information held at Company House will be of limited value. If you're seriously thinking of buying equity in the business there's a few things to bear in mind:
1) You'd be a minority shareholder, so your investment will not be in your hands. It'll be controlled by the major shareholder.
2) Make sure most of the money you stick in will go towards the development of the business and not the other shareholder's back pocket.
3) Ask for detailed managment accounts (or whatever he's got) before you do anything.
4) Obviously I don't know much detail, but don't expect a small shareholding of a little furniture company / retailer will generate enough security to peg up the rest of your life. It probably won't be.
5) Think about the implications if you fall out (relationally) with the other shareholder.
I know the above seems a little negative, but be very careful about putting your cash in someone else's control. However, this may be the beginnings of you acquiring the entire business if the chap is knocking on a bit. He may see you as his natural successor and this may generate goodwill in terms of getting the company for a fair price.
If you do get hold of the management accounts, I'd be happy to have a look and offer some more objective advice. Buying and selling companies is my business (about one a week) so I'll be able to make some comparisons.
srebbe64 said:
srebbe64
How does one go about finding possible investment/empoyment/share-holding/directorships in small companies that either:
1. need investment to grow, or
2. need a succession plan
Cheers
Maybe I'm thick, but are you offering to invest or looking for investment?
Offering to invest.
volvos70t5 said:
volvos70t5 said:
srebbe64
How does one go about finding possible investment/empoyment/share-holding/directorships in small companies that either:
1. need investment to grow, or
2. need a succession plan
Cheers
Maybe I'm thick, but are you offering to invest or looking for investment?
Offering to invest.
The following is the leading UK web-site for companies for sale. Invariably, many vendors are also open to investment / part purchase:
www.business-sale.com/
Some good advice here. I'm taking my company through investment at the moment in mobile phone diagnostics.
Apart from requiring a brief initial business plan for the investment opportunity they (the investors) want to see the people involved in making things happen...remember in investments you bet on the jockey and not so much the horse.
Also they want to see clear market opportunity, how will you do it, when and how much will they get out at the end.
Its putting me through the mill trying to get investment but then again i'm 27 and its a great experience to tuck under the belt.
Thats my two cents!
Richard
Apart from requiring a brief initial business plan for the investment opportunity they (the investors) want to see the people involved in making things happen...remember in investments you bet on the jockey and not so much the horse.
Also they want to see clear market opportunity, how will you do it, when and how much will they get out at the end.
Its putting me through the mill trying to get investment but then again i'm 27 and its a great experience to tuck under the belt.
Thats my two cents!
Richard
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