GaryK

Not quite the same thing though is it? As with most large organisations their cash wealth manages to cover up some/all of their incompetence and they lose lots because they invest lots.

What Mike is saying is true there are literally *hundreds* of small businesses that would need/like to have funding and its a great way for an investor with a medium amount of cash to get involved with and the investment doesnt need to be that large and the investor gets an equity stake. By targetting these sorts of businesses it could be 250K spread amongst 10/12 companies rather than a 'all eggs in one basket' approach.

As with anything you would get an accountant to look at the current financial position of the business and get a solicitor to do due dilligence. You arent going to elminate risk but you can minimise and I disagree, you dont need to have run your own business to invest in others. There are plenty of VCs/Angels that although successful havent always got their money from running a business.

Gary

Trout

iTrader: (1)

Is there some invisible elf writing things in my posts after I have typed them so I cannot see them?

Where have I posted that you need to have run your own business to invest in one? Indeed I specifically posted that for some people their business is investment in other businesses

It's as bad as baby boy - when I clearly post that I set my own business up a year ago and then describe how it works I get a rant about twenty year businesses and new ones not competing, blah, blah.

The bottom line is Gary - there are professionals who do exactly what you describe - they create a portfolio of businesses by investing in them.

My observations are that no matter how good you think you are, then just pause for a moment and think again. Surely that is prudent advice.

I certainly would have great caution in trusting a solicitor and an accountant.

They can tell you the visible numbers but it is highly unlikely they will tell you growth strategies, market penetration, business model, potential market growth, customer base, non-customer base, red growth strategies, blue growth strategies, supply issues, competitor strength.

The professionals you refer to - typically venture capitalists want at least 50-70% of any business they invest in. Why? Because that is the 'risk premium'. The risk that you may lose your shirt in every two out of three deals and still make a profit. Of course the very best only lose their shirt in every four deals. They also invest in waves and actively manage the businesses.


Oh, and by the way, it is the same thing. Life insurers really thought they understood the value chain in estate agency and they lost their shirt on those deals. I can also assure you from direct experience that if they had hired some estate agency professionals before making those deals and used the experience and expertise then they might not have made the same mistake.

To suggest that big corporates can lose a lot because they invest a lot is flawed. All capital has to make a return to shareholders and very few deals can afford to go south.

Rannoch

GaryK

Agree rannoch I think what you are alluding to (more than me) is that BB can invest his money he just needs to be cautious if a) its not something he has knowledge of and b) be prepared to take the risk and lose some/all his cash.

I would certainly spread it across a load of start-ups, either that or buy a new car, a race horse or a boat!

Gary

Spoon

Selling shirts seems the way to go.

I'm quite surprised with the majority of responses on this thread. I can't surely be the only one to see the reason for the original post?
It's hardly asking for the basics and after all said and done, babyboy can spell and punctuate so he's already immune from placing this thread in to the usual cráp posted on a regular basis.

I'm sure babyboy is also fully aware of most of the necessary qualifications to run a business. I'm also sure he's capable of 'asking' the correct people the finer details should he take the idea further.

Wasn't the thread simply for ideas from perhaps the few like minded individuals on here, rather than to be berated by a few of those very people?

I say good luck to you babyboy for just having the want to change career course for something else that might be out there.

sti-04!!

Buy petrol & stockpile it for 30 years.

Trout

iTrader: (1)

Now we are talking - wanna buy a second hand Subaru

GaryK

He he, already got one, my WR1 might be for sale if we move house.

Cheers

Gary

paulwrxboro

how about top class car hire ?
you could 3/4 nice cars for a start up

blubs

Buy yourself as many new Platform Elevating Machines for your money (you know, the ones on the back of big Transits etc), and hire yourself out to Telecoms, Power companies etc.

I know they are chronically short, and I also know a couple of guys who did this and made an absolute mint.

Not sure how you charge (per job, day?), but it basically amounts to taking an engineer up in your bucket so he can access poles or boxes that are either unaccessible by ladder, or have been deemed unsafe (spiked rainings etc).

Good thing with this idea I think is that it does not matter whether you are rurally located or not - the work is always there.

Good Luck with whatever.

Trout

iTrader: (1)

The majority of top class car hire places don't own the cars - they broker them.

Of course you could be the hirer at the top of the tree

David Lock

I agree with that. Look at it the other way around. So you want to start something different. So who do you ask for ideas? Your dad's been in the printing business for 50 years so forget that. You ask your friendly bank adviser who hasn't got a phucking clue but thinks you ought to buy life insurance in any event. You ask the local chamber of commerce business advisory group who can't think laterally. You might get some ideas from your mates or drinking buddies....... As part of the process it seems quite reasonable to post on a busy board with some sensible folk who might just give an idea that you hadn't considered. If that was straightforward you'll probably find someone on the board who has actually tried it. 2000 plus views to this thread and they are not all taking the ****.

I'd personally put my money into Speed Cameras with my unique "Pay As Your Flashed" slot machine facility dl

babyboy

Paul, I'd love to do something like that as I (obviously) love cars so it would be fun. Thing is I wonder how much demand there really is for that sort of thing. From personal experience I don't know anyone who has hired a prestige car except for weddings.

Gary, yes the VC thing sounds tempting but I wonder if its for people with more money than me. I get the idea that to spread £20k each across say 4 set ups with a possibilty that all could flop is really for those to whom £80k is almost small change. I don't know if dragons den is realistic but those guys are anally retentive about where they put their £20k and they have millions of pounds!

Blubs, don't those sorts of companies have their own machines?

Spoon/David Lock : spot on!

Peanuts

iTrader: (15)

you wont get the answers you seek on Scoobynet unfortunately.

Echo

www.RecordProduction.com

Edited to add that I am not trying to solicit investment!

Trout

iTrader: (1)

Warren Buffet was briefly the richest man in the world. He is currently worth over $20bn and started out investing in businesses in 1956 with $100.

There is a great story about him having a round of golf with his chums and on a par three one of them says, "$20 says you don't get a hole in one. If you do then we will give you $20,000."

Warren considered this and said no. After lots of back and forth about how could he miss such an opportunity he said," Stupid in small things, stupid in big things!"


Successful investors are as anally retentive as the Dragons - although the information they want is pretty basic for any company - it is just that most people love their product in the same way every mother loves their baby. They forget all the other stuff.

And we know not all babies are beautiful

IMHO the best product of the night was the water valve - and even that had a specific market which the inventor had very smartly identified. It would not be a successful retail product unless insurers offered a discount for having one fitted.

R

GaryK

Im not sure about the water valve, as PJ said people wouldnt buy one until they had the problem and then the insurance would cover it. Its typical human nature you arent going to spend money until you need to. But yes an insurance discount and it would fly.

I liked the egg cooker (if only it could have worked) and I'd buy one!

The thing is all these start-ups have to give up large equity stakes so BB if you do invest as an angel (VCs typically alot more than 250k) you could be investing as little as 10K but still getting 30,40% in equity. Every pitcher on DD has totally unrealistic shares to give away, I know because I have done it, I was a director of a telco and we got private equity funding and my partner and I were thinking 25/30% stake to giveaway, nope the deal could only be done if we gave up 48%, 24% to the two investors and 26% to us as the directors.

By the way if you do want to buy a business check out www.businessesforsale.com. My experience is that most of them on there are over-valued but hey you can always negotiate.

Gary

Trout

iTrader: (1)

Which is why the smart move of the vendor was to contact housing associations. A small concentration of buyers with a vested interest in a huge number of properties (1.6m) where the co-owners are potentially less likely to care if the bath overflows.

A 2% penetration and he would hit his sales targets easily.

To me that was his brilliant insight.

The product itself had also been designed properly so it could be fitted easily and cheaply.

This guy was all about the right details.

All IMHO of course.

Fat Boy

Google your local business angel forum, join it and go along to a few of their meetings.

You'll meet successful entrepreneurs who have risked anything from no money / just their time = sweat equity, to those who risk £20k each in 6 or 7 ventures as start ups, to those who buy mature businesses for £10s of million quid upwards.

There will be some bull**** merchants, but there will also be some good people there with good experience. If you trust yourself to be able to tell the difference piggy back on some of their deals and then keep your eyes an ears open.

They will also have good contacts for cost effective and commercial legal and accounting advisers (a rare combination in my experience)

You will get to see lots of business plans. 99 out of 100 will be rubbish - for each one that isn't completely barking, you will maybe do 1 in 10,and you then work on the basis that if one £20- £50k minority investment comes off it will pay for all the others that maybe don't do so well or will crater.

Basically look for experts in their sector who have a unique skill or product with a high barrier to entry,make sure that they are sufficiently resourced and that they and you are prepared to work very hard.

Don't do franchises as the real value will already have been taken out by the founders originally whose IRRs will be in the thousands of percent, whereas a successful franchise might make you a few tens of percent if you're very lucky.

best of luck

FB

babyboy

Thank you for not patronising me and giving me useful avenues to explore. I think thats exactly what I'm going to do ie go along to some local business angels meetings and just sit and listen for a few months. This will allow me to think about lots of different kinds of businesses and in ways I probably haven't before. Then when I feel a bit more confidant I'll think about investing.

Is it as easy as that though? Will my local 'angels' just let me join or is it a bit of a closed shop?

BB

Fat Boy

They are always looking for new blood. They wouldn't bother joining the organisation themselves if they had all the resources to hand (whether monetary or management/ skills etc). Usually there will be people trying to raise the capital to get something off the ground and the first rule of all investing is diversification - don't put all your eggs in one basket - so they will look to have someone alongside them. Also have a look at the BVCA site - british venture cap assoc - there are some good fool's guides on there and sample dox etc.

So, go along, sit and listen, try to find good people and align yourself with them, look at the business plans that you will be shown, but don't do anything for a while - just learn.

Then apply the "everything I'm shown is ****" rule and weed out the nonsensical ones. Everyone has invented the new mousetrap so be careful.

Perhaps find one that seems to tick all the boxes, put a small amount in and regard it as a learning experience - there is lots to learn not just what's a good investment, but the whole process - business plans, shareholder's agreements, service contract, due diligence, tax breaks ( e.g. look for an EIS investment - you get 20% tax relief on the ordinary shares invested in, no capital gains if you keep that investement for at least 3 years ( and taper relief if you don't) and tax relief if it craters - so you're not risking all your money.

At the end of the day though remember that it is a high risk/ high return game - but split the investments and if one comes off it should pay for all the others.

babyboy

Thanks again.

Do you mind if I ask you what your background is. You seem to know quite alot about these things.

Fat Boy

Have a wild guess

babyboy

Hi again. FB you are a BA?

I've been doing a quick search on the subject and it seems that BAs typically invest £50k to £1million. Is that each BA or as a collective? If its individually then thats too much for me as I only need the first 5 to be duds( which is easily done by what you say) and I've wiped out 10 years of hard graft!

Thanks

Fat Boy

Might be

Can be as little as £10K or even nothing if you bring something to the party - skills, knowledge, energy - and take a complete or partial pay freeze until the enterprise is up and running - AKA sweat equity.

Sit on board in return for non exec fees, if you can, again usually delayed until the business is making money, which can effectively get your investment back fairly early.

No guarantees in any of this obviously, you need to evaluate each potential investment by yourself. When they fail you've lost your initial investment, less any tax relief; when they succeed you can, if you're lucky and put a lot of energy in, make a good return.Almost the worst case scenario is for them to bumble along doing very little.

If it was me we were talking about in this situation then I wouldn't put it all in straight away. I would set myself a limited amount, say no more than £20k each in no more than 3 deals in the first year, and see how I get on. I'd then put the rest of the cash somewhere nice and secure in the meantime.

None of this should be construed as advice obviously as I am merely telling you how some people in this market do it. Any decisions from here on in must be your own.

Cheers

FB

DCI Gene Hunt

Invest in ZOINTS............ you know it makes sense...........

Fat Boy

Yep, monetise the long tail is where it's at these days..

babyboy

Thanks bud. I'd have no intention of putting the whole thing in and as you say would limit myself to £10-£20k a pop over a few deals. Even that would be after just being a voyeur for 6 months or so.

Don't worry I'm not after specific advice about what to do just a general idea about how things work in this game.

A quick tax question if you don't mind. Can all losses be written off against tax?

Fat Boy

Not worried, just sensitive to accusations of unregulated advice by the FSA.... Happy within reason to answer more offline.

Tax question is a bit of a "how long is a piece of string". Under the Enterprise Investment Scheme ( "EIS") you can make cumulative investments of up to £400k in any given year - so it's aimed at BAs, there are various ways in which it can be tax advantageous such as taper relief and write offs.

Best thing to do is to go to the inland revenue site and have a look at their extensive guides to EIS (and VCTs if you don't want the direct involvement in an investment) as they are written for the layman and are pretty understandable.

happy hunting

FB