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Questions to ask when consideringinvestment in a private business

Saturday, February 23, 2008 | Usually Conservative Is this Spam?

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1. Who are the principals and what is their knowledge and level of experience in the business?

2. How long has the company been in business? Is it well-managed?

3. Are they in a niche market that has already been exploited/developed? Do they have an "edge" that would allow them to succeed in an already developed marketplace?

4. What is their return on equity? What is their debt to equity relationship?

5. How exposed are they to current and projected market conditions?

6. Are the principals significantly invested in the company or are they running primarily on someone else's money?

7. Are they making claims that sound too good to be true? If yes, they usually are!

8. Do you know anything about the business you are investing in? If not, you best not invest unless you have an advisor who is very knowledgeable about the business.



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