Other People's Money and You
Almost all investors will want to
The investor will want to monitor how their funds are being used. Let's look at each of these points in detail: See a Concrete Business Plan Many business' fail to plan, hence they are planning to fail. A concrete business plan, details the company's business direction. It helps steer the company in the right direction and move it closer towards success. If no clear direction given, the business may move in different directions at different times, especially if opportunities with seemingly better prospects suddenly appear and distract the entrepreneur. Without a clear focus, the business will eventually crash and burn. Closely Monitor your Operations (meaning you likely have to submit regular business reports) Investors will closely watch how you, your partners and employees operate the business. Most investors will usually be experienced in running businesses themselves. Expect to document your processes and submit regular progress reports. By monitoring your system and processes, you will benefit by having a clear idea if you're headed in the right direction. Have an Active Hand in how Business Decisions are Made As the majority shareholder, there may be times when the investor may override your decisions, or block attempts to move in a specific direction. While some entrepreneurs may be unhappy with this move, do recall that you had solicited the investors funds and they typically expect majority control. Want to have a Majority Stake in the Company As an entrepreneur you may feel that your idea is worth $1 million and hence, feel insulted when an investor offers you $200,000 for a 70% stake in the company. By valuing your company at about $280,000, the investor is taking a calculated risk that your idea which is yet unproven, will eventually turn out to be a winner. Honestly speaking, ideas are easy to come by. To realize an idea's potential requires a lot of effort. As Albert Einstein said, 'Genius is 1% inspiration and 99% perspiration'.
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