5 things you need to do before investing

5 things you need to do before investing

Many people will invest in some class of securities (stocks and bonds), business, or franchise at some time in their lives. If you have a managed pension plan at work you are an investor. We constantly read about businesses that are doing well and making their investors a lot of money and about the businesses that go under. I have put together a list of 5 things you need to do before investing.

5 things you need to do before investing

1. Understand the business.

Never invest in anything if you don’t understand it. Take your time to research the industry and business model. If after speaking with the investment advisor or salesperson you still don’t fully understand the plan, do not invest.

I know of people that have invested in stocks such as Twitter that have never used Twitter before. They took their advice to buy from an online stock show. This is risky and careless.

Related article: Understanding business basics

2. Have tough conversations early.

Do not wait to ask questions. Let the investment advisor or sales person know what is important to you upfront. Are you afraid of the risks? Do you need a 10% return? Is the location of the business the most important thing for you?

At the end of the day investing should be simple. The investor wants to receive a good rate of return and the company is typically trying to raise money to expand. If you are upfront with your needs you will get a fast answer as to whether the investment will work for you.

3. Speak with a lawyer at the right time.

Most people know that they should speak with a lawyer before signing complicated legal documents. However, many lawyers will advertise themselves as lawyers that can help you with any of your needs. Whether you are going through a divorce, got arrested, need to buy a house, are buying a business… They can help you.

Do not hire those lawyers. Find a lawyer with business experience or if investing in a franchise, hire a franchise lawyer. Make sure they spend a majority of their practice in these areas.

Timing is also important. Speak to a lawyer as early on in the process as possible (once you have your documents.) If you wait to the last minute to visit a lawyer it will upset the other party if there are major last minute changes needed.

You don’t want to hire a lawyer too early in the process before you are sure you want to do the deal or you will waste money.

Related:  How to hire the right attorney 

4. Speak with the owner or CEO.

Decisions come from the top down. You may  know the salesperson or investor relations manager of the organization very well but you should at least ask the owner or CEO some questions (even if it’s over the phone.) Ask them about their vision and where they want to take the company.

5. Know the exit strategy.

This is something your business lawyer might be able to help you with. However, you should give it some thought yourself. What would you do if things didn’t go as planned? What happens if the investment is doing very well but you need to move on due to retirement? The plan should be well thought out.

That was our list on 5 things you need to do before investing. Did we miss anything? Send us a message to let us know your list.

This article was written by Alistair Vigier of HART Legal. HART Legal is a law firm with locations in Victoria, Vancouver and Calgary. They are currently opening locations in Burnaby, Richmond, Calgary, Edmonton, Los Angeles, and Toronto. If you would like to learn more about HART Legal and how to apply for a franchise visit here.

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