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

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.

OVERVIEW

•

Below, I have outlined a variety of topics to
research so that you can make the best wellinformed 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.