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Learn the basics of how and where to find business investment opportunities. Discover what signals to be aware of.
The online world offers endless business investment opportunities. However, before selecting a profitable business to invest in, there are several key factors to evaluate.
If you want to become a business owner for the first time but don't know where to start, you are in the right place. In this article, you'll learn what signals indicate a potential good investment. Keep reading!
Related: Lifestyle Businesses For Sale
Finding the right business to buy is not only about matching what you can pay for with what the market offers. It is about finding the right company, according to your profile, one that is not only profitable at the moment but that has a sustainable business model.
Here is a list with a few tell-tale signs of a good deal:
When your product or service offers something different from what already exists in the market, and especially isn't easy for competitors to replicate, you have a competitive advantage. Companies or goods with this trait usually own patents, trademarks, or an innovative business model.
If customers can easily spot what differentiates a business and why they should buy from it over the competition, then you have a unique value proposition. Additionally, a strong brand identity can help build and establish a long-lasting competitive advantage.
Above-average customer service can also make a difference for the target audience when making a final purchase decision.
A competitive advantage can help you easily stand out from market options. But it's important to preserve this unique trait for long-term success.
A profitable business is in for the long run. It should be able to adapt to market trends rapidly and have a positive impact on the community where it operates.
Being a sustainable business not only means targeting consumers who are increasingly supporting ways to be more environmentally friendly. A study by NielsenIQ done in 2022 found that 78% of consumers in the US say that a sustainable lifestyle is important to them, while 30% are more likely to purchase products with sustainable credentials.
At the same time, sustainable businesses can reduce costs by generating less waste, managing their resources in a better way, and more practices that can be cost-efficient and have a positive impact on the company's lifespan. By doing this, the business makes a good impression on consumers who value this behavior, strengthening the brand's image and reputation in the market.
Additionally, a sustainable business should follow government regulations. Failing to do so can bring harmful consequences to their long-term success.
A successful business adapts to market changes. To stay ahead of the curve, companies must be constantly innovating and offering new products and services to their customers.
According to research from McKinsey, "companies that harness the essentials of innovation see a substantial performance edge that separates them from others—with evidence that mastering innovation can generate economic profit that is 2.4 times higher than that of other players".
Innovation metrics can give potential investors further insight into how much revenue the business earns from new products and, therefore, how much income they could expect from new launches.
Businesses can innovate from inefficient processes, voids from what the competition is offering, bringing the latest tech into the business to deliver an enhanced product or experience, and understanding what the customers are missing with the current solutions in the market.
By innovating, businesses can create or increase their competitive advantage, improve their customer satisfaction, and, of course, become more profitable.
This is an obvious one. A business that is profitable is a great opportunity, even more, if it has enough room to develop new revenue streams. Potential investors should do their due diligence and learn about the business's current financial situation, debts, break-even points, and costs.
In their analysis, they should be able to have a clear view of the competitive landscape and understand where the business stands. This will give them insight into how profitable the venture can become.
Business investment opportunities aren't always easy to find. Because of this, investors must be proactive and develop their own combination of preferred methods to help them spot potential investment opportunities to add to their portfolios.
Here are some places where you can start
At online business marketplaces like Boopos, you can find multiple investment opportunities in SaaS, digital products, companies at a growth stage, marketing and sales ventures, and many more. There are other options like Flippa or Acquired.
Browse the available catalog of the business marketplaces and learn more about the funding and profitability of the companies for sale.
Businesses that work with affiliates can dig into their partnerships to look for potential investments. Some of these affiliates might be open to a capital injection due to growth plans. Investing in an affiliate deal demands a few hours of overseeing the operations (compared to other investment opportunities that are more similar to a full-time job), yet they can become a source of income.
Networking with angel investors, small business owners, and entrepreneurs can help you be part of a community of business professionals who share your interests, are based in the same geographical region as you, and are actively working in their businesses. By being near them you can gain access to businesses on sale or that are looking for investors.
A community of investors can help its members share information about new business opportunities, run due diligence, or even form new partnerships to develop new ideas. The downside of these groups is that the investment market can be full of competitors ready to jump at the best option.
Industry events such as tradeshows and startup conferences are also a good way to learn which companies are looking for angel investors to grow or need extra capital and to expand your professional network, which can come in handy later when searching for businesses to invest directly. At these events, investors can access the latest innovations, which can result in an investment opportunity.
By conducting market research, investors can learn how profitable and successful a business opportunity might be. This process should include information about the current competitors and the target size, as well as interviewing people who fit the market description.
The purpose of the market research is to identify plausible business opportunities that would potentially need capital to be developed.
Looking into the accelerators and incubators portfolio can help you find businesses looking for investors. The startups that belong to these incubators have already gone through a due diligence process that has proven the business idea is feasible. Yet, this doesn't mean that these investments are risk-free. By being part of these programs, the start-up team is learning new skills that can help the venture become successful.
Following the industry news and trends can point out which businesses will be under the spotlight and which are being pushed to the sidelines. This can help you spot innovations that are rising and that are possibly looking for investments to grow. At the same time, you can find businesses that might be struggling, and therefore, their valuation is lower, meaning that they can be purchased at a lower price.
If you wish to learn more about industry news and trends, you can subscribe to newsletters from industry leaders, listen to relevant business podcasts, review yearly reports and rankings done by consulting groups, and set up Google Alerts to follow relevant information.
Struggling businesses are high risk and, in some very rare cases, can be an investment option. The appeal of these investments is that due to the issues they have encountered, their valuation might come lower than under normal circumstances, which turns them into an inexpensive opportunity for investment.
Fearless investors who trust their business skills won't be easily persuaded to jump at this opportunity. Those who have a professional background or expertise in the specific area in which the business is struggling will likely consider these deals as challenges and work on fixing the problem that brought down the venture and, in the end, increase the profit.
Before moving on with a business deal, investors should pay close attention to business metrics and other factors to ensure they aren't missing any relevant information for the purchase.
Before investing, you should have a clear picture of the following:
Additionally, you have to understand the financial statements of the company you are going to buy, to have a clear perspective of where it stands regarding liquidity, leverage, profitability, and market value. Founders should present all their financial information broken down in a way that can answer questions from potential investors (such as for how long the cash will last, which are top projects to fund, besides other KPIs such as LTV, churn rate, and more).
If it's necessary, investors could hire a financial advisor to help them go through the financial details of the business and their personal account to make sure that they're making a good investment.
Besides the idea, product, or service, investors may want to learn more about the management team, including their background, skills, and motivations to scale the business. A highly driven group can offer to make a difference when working towards specific goals.
Also, investors would want to know if it's necessary to add new team members who can play a significant part when reaching new business goals and executing the current business plan. Having advisors on the team can increase the appeal of the business opportunity.
Some investment opportunities might require specific knowledge or skills that might have to be learned by investors who wish to understand the business fully. Besides this, it's important to grasp what this special skill set brings to the table when building and delivering the core product or service. Finally, investors should ask themselves if they would want to participate in an investment opportunity in which they might not be experts.
Having clear goals for an investment can be a game changer when narrowing down investment options. Objectives may come in the form of a desired ROI, time and effort willing to put into the business, scalability, innovation expectations, and more.
There might be investors who expect a quick return on their investment, while others won't mind waiting a little longer to reap the benefits of their choice. By having this information clear, it's easier to pick between investing in a small business in its growth stage or in an already established venture.
The market size and how easy it is to scale the product are questions every potential investor should go through before moving forward with the deal. Also, it's important to know the step-by-step growth plan, meaning that business owners should know the percentage of the market they want to tackle periodically.
A crucial part of an investment opportunity analysis is learning about the competitors. Markets with a significant amount of competitors will probably put off potential investors. While products and services that seem to have little competition will be more appealing.
On this matter, it's also important to learn if any of these competitors hold a competitive advantage that can affect the potential business opportunity. Additionally, competition can have a higher weight on the industry when it comes from a well-established brand.
There might be businesses that already have a reputation, which can have a positive or negative impact on the venture's profit. Investors should do their due diligence regarding how the business opportunity is perceived among the target and if it would be beneficial to rebrand the business.
A company's intellectual property can be the secret behind its success. Because of this, investors must be aware of existent patents, trademarks, copyrights, trade secrets, or domain names that can offer a competitive advantage to the business. They should also be briefed regarding whether this intellectual property violates the rights of a third party and if there's a possibility that former employees could claim it as theirs.
When it comes to investing, risks are a possibility; this is why, as an investor, you should have the full picture of what might go wrong. Additionally, businesses should already have precautions to face these threats. Ventures might face risks regarding new laws, finances, intellectual property, technology, product liability, and macroeconomic issues.
Finally, as an investor, you should assess your risk tolerance and choose an investment opportunity according to it.
Every day, our world becomes more interconnected, meaning online businesses gain more significance. Because of this, investors should consider including online businesses in their investment portfolio. Here are a couple of reasons why doing so is a good idea.
Investing in an online business comes with reduced costs due to a lack of physical property (such as equipment, real estate, and sometimes even inventory). The operation costs of an online venture will depend on its business model and strategies. Inventory and paid advertisement still represent costs to be paid.
Some of the expenses you may encounter with an online business will be website fees, licenses, software costs, legal fees, and marketing expenses.
Growing the business can also come with reduced costs. Since there's no need to acquire offices, stores, and storage units, the business can reach more people from their target and different geographic points with low overhead costs.
Also, due to the online nature, all the required planning to scale the business would rely on digital strategies, which would be easier to manage (compared to the supply chain of a brick-and-mortar business). These businesses can grow more quickly than their counterpart and, therefore, generate revenue faster.
Any changes in digital strategies can be made easily and pretty much after reviewing results. Online businesses are much more flexible and easier to adapt to market shifts than brick-and-mortar ventures. If there's a strategy or sales approach that isn't working then it's easier to drop it and do a change of plans.
If you are looking for an investment opportunity, online business marketplaces like Boopos are a good place to start. The deals in our platform are vetted by our experts and they can assist you in getting the best deal.
Browse our marketplace or contact one of our experts to guide you through the buying process.
