The Passing Lane: Passing the Competition Online by Marnie Perhson

Issue #8 Tuesday, November 10,1998

About the Author:

Marnie Perhson
Marnie Pehrson, founder of C.E.S. Business Consultants and the
International Association of Computer Professionals, develops products that help computer professionals market and manage their businesses.

She is author of
How to Run a Successful Computer Training Business,

How to Get & Keep Customers for Your Computer-based Business


and
Keeping Your Sanity in a Home Business.

Marnie also develops business plans, marketing strategies, financial projections, & proposals for Internet projects. Her plans and strategies have garnered clients an average of $100,000 each in seed capital.

Marnie lives on a Georgia farm with her husband and their six children .

Contact:
C.E.S. Business Consultants
Ringgold, Georgia
http://www.pwgroup.com
mailto:marniep@pwgroup.com
TEL: 706-866-2295


PREVIOUS ISSUES

Investing In the Net

A couple of articles back, I talked about how to obtain funding for your Internet-based business idea. Then, Mike here at Sideroad, asked about the other side of the coin: "What if it was your venture capital to spend, would you invest in any Internet-related businesses?"

When making any investment - Internet-related or not, you should proceed with caution. I've seen people get seriously burned by investing in Internet-related businesses. Properly managed, well-researched projects can be a good investment. But, if you are thinking of investing in an Internet-related business, there are a few pointers to keep in mind:

Don't get caught up in the hype. There's something about Internet-related projects that gets people excited. They'll risk more and invest more because they see it as this vast untapped money-making wave of the future. But, along with the great possibilities, there are a lot of unknowns. We're still learning what works and what doesn't on the Net. Make sure that the project you're considering investing in has good management and a solid business plan. I'd also be more willing to invest in a project that is already producing revenues than one that only exists on paper.

Do some "due diligence." Research the company thoroughly. Often, you can ride on the coat tails of venture capital (VC) - backed projects. Venture-backed projects have been researched twice--once by the VC Corporation and once by a banking institution. So you know that if a VC Corporation is backing a business, some "due diligence" has already been performed. (There's an article on this topic at http://www.datamerge.com/financingnews/venturebacked.html.)

Never give a business your money without a signed contract that stipulates everything. Have your lawyer look over it and make sure it covers all the bases and protects you completely.

Check out the credit history and background of the owner. If you're considering investing in a solely-owned (or one principle owner) business, get references to their character and past investment relations. You probably won't have much say in a business if it's solely owned, so youŽd better make sure the owner is someone you trust.

Don't invest more than you can afford to lose. Like any investment, there's risk involved. If you look at your investment as a gamble that may or may not pay off, you'll be prepared if things don't develop as planned.

Decide whether your investment is a loan that must be paid back or whether it's a loan that only gets paid back if the project works. If the loan must be paid back, who will pay you if the project fails? Either way, set up a payment plan or dividend schedule ahead of time and get it all in writing. If your investment is to be paid back only if there is a profit, make sure that outside auditing and official financial recording methods are in place so that you're not just taking the word of the primary owner(s).

Make sure that the person calling the shots isn't also the person holding the purse strings. Money makes people crazy and absolute power corrupts absolutely. The combination can make for disaster. Make sure there are financial records that you can review before investing in anything.

These are just a few precautionary measures to take when investing in an Internet-related business, or really any business for that matter. Do you have any more you'd like to add? Send your thoughts or suggestions to me at marniep@pwgroup.com.


Text Copyright © 1998, Marnie Pehrson. Part of the original Sideroad.
The new Sideroad is now receiving traffic at www.sideroad.com.