Thinking of Investing into the Next Microsoft? Consider these Red Flags

There is a good chance that once in your life you will be confronted with the next great business opportunity or investment. It is the slam dunk that will turn 1000’s into $100,000’s just like that. There are many more stories of losing money in these great deals than actually making money. Well, when confronted with such an opportunity there is a short list of things to keep in mind.

(1) What risk are the promoters taking?

How much money do the promoters of this next great idea have invested? If they have a ton of money at stake, then it makes it worthwhile taking a further look. It is a red flag if only time and expertise are the investment.

(2) Be comfortable knowing that these deals are boom or bust

There is a reason why the promoters are going to the public for investment money. Big money speculators won’t fund them and a bank certainly wouldn’t consider it. Ideas that are very high in risk are mostly either boom or bust.

(3) Most of these deals are over-promoted and sensationalized

Every new idea is next great thing. Discount all of the over-promotion and look way beyond the sensational claims.

(4) Are they only promoting the upside and ignoring the downside?

There is downside risk to everything. It is a huge red flag if they are only promoting the pros and not giving any time to talking about the cons.

(5) Are you listening to an expert or a top notch salesperson?

Most of these ideas are pitched by great salespeople that have very little working knowledge of the idea, product, or service. Make sure that the person who is getting you information is the one most qualified to educate you.

(6) Conduct internet searches on everyone that is involved in the deal

The internet is a powerful tool. A Google search should produce a track of record success. Any negative information should tell you to walk the other way or at least ask more questions. No information at all should be a concern. You want to read about a track record of success.

(7) Check the background of those involved

Make sure that everyone is emotionally and professionally 100% involved in the success of the execution of the idea. Make sure that those involved are qualified with years of experience and proof of past success. You don’t want to be the person who invests into the next future failed experiment.

(8) Remember the motto – if it is to good to be true it is!!

Just remember the motto……. Although cliché this has always been wise advice.

(9) Is there an extensive business plan and analysis of future gains/losses?

If you are going to risk your money, there should be proof that this has been a well thought out and thoroughly analyzed business idea. Any idea worth considering is backed by a thorough business plan.

(10) If a high pressure sales presentation is involved, run the other way.

Strong potential ideas don’t need to be high pressure sold. However, ideas without much merit require high pressure sales.

Finally, don’t underestimate your ability to rationalize away 1 through 10 in the hopes of big money.