Wednesday, April 15, 2009

Investors Can Help and Hurt

Many small businesses grow by taking on investors. This can be an excellent strategy, but there are a few things to consider first before you make any decisions.

An investor is someone who provides capital (cash!) in exchange for a piece of the ownership of your company. The money they bring in can be a real lifesaver. It gives you an important tool for growth and can shore up your financial statements. In addition, some investors wish to make other contributions to your business, such as their time or areas of expertise.

So what's not to love? There can be a downside to sharing ownership of your company. Make sure you understand up front what else investors may believe ownership entitles them to. Will they assume you have to take their advice? Can they insist on changes? Can they "help" you run the show?

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