LIVING OFF DIVIDENDS & PASSIVE INCOME

Today’s guest post is from James at DINKS finance:

This posting will be on the topic of doing due diligence when evaluating investment opportunities. When I’m talking about investment opportunities, I’m speaking specifically about taking part in new business start ups. I’m not speaking about investing in stocks or loaning money to people at interest. To invest properly in new businesses, you’ll have to do what’s called “due diligence” or simply put you need to do your homework.

Here are some thoughts on doing this:

1) Research the market. All business operate within given markets. You should consider the demand for the product or service that your candidate business would produce. For example, if you might be considering investing in an internet start up. In this case you should consider the demand for the software or service the company is producing. Is it an American company which is feeling pressure from Indian or China? Is the product going to be used by a growing industry? So, to summarize you might consider using the internet to get a sense of the market.

2) Talk to People. An acquaintance of mine took a position in a chain of Buritto restaurants in Louisiana. After hearing about the opportunity from his father he went to the restaurant and talked with the employees and a couple of the customers. In addition to talking with the businesses staff, you might also consider speaking with people you know who are knowledgeable about the industry you’re considering. For example, when my wife and I were thinking about doing a real estate development in Portland, we talked with my uncle, who is a contractor and keeps an eye on trends on real estate on the west coast. With his help we were able to determine that the proposed development wouldn’t be profitable, so we decided to shelve the idea.

3) Go Over The Numbers. You might consider sitting down with a spreadsheet and figuring out what the projected profit and loss numbers look like for the first two years of your prospective businesses. Consider factors like projected profits, the probability of losses, tax implications, staffing costs, etc. If under a set of reasonably conservative expectations your company wouldn’t be make money then you should think twice about investing. The main point here is to put some numbers to the situation to critically about the company’s potential profitability.

Finally, direct investing can be both a challenging but very rewarding experience. However, to avoid losses you’ll need to exercise due diligence. Hopefully these tips will help you think critically about how to do this.

If you found this post helpful, consider donating to my coffee fund!

Related Posts

• All Intelligent Investing Is Value Investing Today's post is courtesy of Wealth Building Lessons. This past year, the stock market has seen incredibly volatile swings. My non-retirement portfolio has been up 20% and then down to 0%. Twice. Of course, my portfolio doesn't have a direct correlation with any of the indices but it just as......
• Oil Break $115 Per Barrel Oil just broke through $115 per barrel today. While this may come as a shock to many , I've been preparing for it for the past 2 years. All the signs of an oil shortage have been visible in the media, but most people have either been ignoring it, been......
• How To Save The US Economy Will the $700 Billion bailout save the US economy? I don't think so, mainly because I'm not really sure where the money is going - I don't think even congress understands how it's supposed to work. Keith Fitzgerald, investment director of Money Morning, wrote an interesting hypothetical letter to Ben Bernanke......

Related Websites

• Money Question: What Would you do with a Windfall? Over the past couple of weeks, I decided to go out and ask a few of prominent bloggers a question that's been on my weighing on my mind lately: Where is the single best place to invest a $50K after-tax windfall now? Assume the following: you don't need the money......
• The Top Home Internet Business Opportunity – Catapult Your Income Online What’s the best home internet business opportunity around today? For people looking to start making money online this question occupies your thoughts most of the time. Not surprising then, that a whole industry has sprung up selling the dream that easy cash can be made on the internet in a......
• Opening Of Own Site On The Internet. This service will cost you much more expensively: depending on the order the prices are in the range of $200-10000. You should be on the alert if the price is higher: most likely, somebody wishes to deceive you. There are some variants of decisions: Site-business card. It is similarly to......

[All content is copyright of Living Off Dividends & Passive Income]

Related Posts

• May 12, 2006 -- How to become a Billionaire
• June 21, 2008 -- How To Start Multiple Businesses
• October 2, 2009 -- Why Do Most Small Businesses Fail?
• September 14, 2009 -- What You Need To Know About Being Sued
• September 10, 2009 -- Weekly Round Up Of Interesting Articles
• August 31, 2007 -- How To Start A Vending Machine Business
• June 7, 2007 -- Starting An Ecommerce Site

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.