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Checklist For Investment Evaluation

Evaluate The Opportunity
Yes
No
I have listed and defined my personal objectives for this investment.
I know my probable return on investment (ROI)
I know the payback period for the investment.
I have discussed this project with other current and potential investors.
I know how long this opportunity has been available.
I understand the financial plan and believe the assumptions and projections are reasonable. If No, has the plan been reviewed by independent professional advisors?
Is the marketing plan realistic?
I understand when the business is expected to become profitable.
I know when I can expect a return on my investment in interest or dividends.
I know how and when I will get my capital back.
If I am purchasing equity, I know what I am purchasing (common shares, preferred shares)
I know if there are warrants or share options attached.
If I am purchasing debt, I know if it is subordinated debt? Convertible debt?
Evaluate The Risk
Yes
No
I know how much I could lose and the risk of loss on this investment.
If the project involves development of a new product, process or other technical innovation, is there independent confirmation that it works?
All the regulatory requirements have been met. (Environmental, zoning, patent searches, etc.)
I know what the funds raised will be used for.
Is the business operational now?
If it is losing money, I know the burn rate.
I know how much my investment will be diluted as a result of the founders getting an interest for their sweat equity.
I think the founders have invested an appropriate amount of cash in the project.
I know what level of involvement is expected of me.
If I want to be on the board of directors, am I entitled to representation?
I understand the legal structure of the investment. If No, I have had professional advice on the subscription form or prospectus.
I know if some or all of my investment is secured by assets.
Could I be legally bound to put up more money in the future?
I understand the legal structure of the venture and the significance of the structure on my current and future risks.
Is adequate insurance in place for assets, key personnel and directors?
Are all tax filings (income tax, payroll, GST, etc.) Up to date and have these filings and related assessments been reviewed?
Evaluate The People
Yes
No
I know and trust the people who are making the sales pitch to me. Or I have confirmed their reputation with credible third parties.
I know what and how the promoters are being paid (if anything).
I know the history of the key implementers of the business plan.
I know the terms of employment, contractual and salary agreements for the key personnel.
I know the reputations of the current shareholders, officers and directors and key professionals to the project.
Has a lawyer conducted corporate and personal searches on those involved in the opportunity?

Source: Manitoba Author: Cam Crawford
 
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