Looking for a new investment opportunity? It is important to invest in smaller businesses as an investor as this provides the potential for great success and a chance to be part of a growing business.
Investing in larger, more established companies is merely about profit but with a smaller firm you get the thrill of being part of something.
Giving a Helping Hand
When you invest money in a smaller business then you are providing that company with the funds needed for them to either get set up and start operating or to grow. There are many entrepreneurs who have fantastic ideas but struggle to get their business up and running due to a lack of funding – by providing support, you could be helping to bring an important new business into the world which everyone can benefit from.
By investing in a smaller company, it also allows you the opportunity to come along for the ride. You could be a key part of the business in terms of finding the right staff for the company, buying new technology to help with the operation, training staff and helping to make key decisions. If you have a passion for business then this will always be more rewarding than simply investing in a much larger company and enjoying the dividends because you get to be a part of the journey.
Many investors use VCTs as a way of investing in the growth of small companies that are not quoted on the stock exchange and this is a smart idea. VCTs are government-backed and listed on the London Stock Exchange and were introduced as a way to encourage investment in smaller companies to boost the UK economy. You can claim 30% income tax relief on your VCT contribution which could help you to build a solid income stream while helping a smaller company to get the chance to succeed. You can use experienced investment specialists like Downing to manage these VCT investments and to find the best opportunities.
Areas to Consider
When investing in a smaller firm, there are a few key areas that you will need to look at to make sure that you are making an intelligent decision. This includes the gross margin, the strength of branding, who the CEO is, what the exit prospects are and recurring revenue.
As you can see, there are many reasons to invest in smaller firms and it could prove to be a highly lucrative and enjoyable way to invest your money. Investing in smaller firms allows you to come along for the journey and be a part of something special, plus you could be helping to stimulate the UK economy. As with any investment, there will always be a risk and you need to make sure that you take your time and do your research to make sure that it is a smart move.