Starting your own business is not as easy as deep frying chicken. If that would be the case, businesses would crop up everywhere and they would be earning thousands on a daily basis. Starting a business does not only require extensive research, but also luck and having a keen eye for finding opportunities to earn. You may also see business agreement examples.
As true for all businesses, investment is needed not only to get the business up and running, but to make sure the new business doesn’t go bankrupt within the first weeks or months of its operations. To make sure the investment is complied by both parties, an agreement or contract is needed.
To assist in creating a basic agreement for your business (particularly a small business), here are some examples of small business investment agreements you can use when you will be making your own investment agreement.
An investment agreement is basically a simple agreement where an individual (or business organization) offers an investment (mostly cash) to another business entity in exchange for cash (plus interest) and/or a share of the ownership of the business. The investor agreement, as similar to all other agreements and contracts, is always a written document and never a verbal one.
This is obviously for the reason for parties to avoid scamming each other and to avoid causing financial issues for both parties.
A basic investment agreement comprises of investment terms, basic information of both parties, and the duration of the investment agreement. The investment agreement should be specific and the information listed down should be explained and not be merely stated. You may also see stock agreement examples.
An investment agreement is very important for business organizations as they don’t only need investment to expand their operations but basically for survival.
Companies who are in debt will need investment to recover from the financial dilemma they themselves have caused, in which the investment will help them resume their operations and give them a chance to modify their products or services to fit the needs of the customers or clients. You may also like management agreement examples.
Investment is not only needed for struggling business though, as thriving and high-earning companies also need investment for a number of reasons (but mostly for the expansion purposes).
These companies need investment to purchase new equipment (large equipment such as construction machines, or office equipment such as computers, desks, and chairs), pay for government fees to transfer to another business location, or to purchase initial inventory or raw materials to initiate a new product or service line. You may also check out partnership agreement examples.
Not everyone can start a large corporation nor franchise a million-dollar business. Even if you have enough funds to start a company that employs 500 or more people, it is highly advisable to start small and use the remaining funds to develop the small business. You may also see consulting agreement examples.
Most of all large corporations have always started from small companies. Tech giant Apple started with founders Steve Jobs and Steve Wozniak assembling and selling computer parts in the Jobs’ home. Alibaba founder Jack Ma began his multibillion e-commerce company at his home in China. You may also like shareholders agreement examples.
McDonald’s was merely a small diner before businessman Ray Kroc turned into the biggest fast-food chain the world. The lesson here is never put all your eggs in one basket. Diversify your investment portfolio and watch it turn into a financial juggernaut with time and proper research.
Even starting a small business is risky nowadays, especially if you don’t do enough research or conduct market feasibility studies. Research has shown that 60% of new businesses (mostly small or medium enterprises) close down only a year of operations. This is due in part to lack of research and the entrepreneur setting up the business not because of a market need but rather a personal hobby.
This equates to the individual basically throwing money just to satisfy his own hobby in which various market segments will certainly think twice of purchasing that product they don’t even want or need.
Starting small will ensure you gain a market first before you start expanding your operations. You should already identify your target market before you start producing or manufacturing your products. For example, focus on young male adults (20 to 30 years old) as your market if you plan to sell action figures and other toy collectibles. You may also check out free partnership agreements.
Another example would be identifying households with at least two adults and three children as your target market if you intend to sell various wooden furniture. Identifying your target market beforehand will help you manage your finances, thus avoiding situations where you overspend or underspend for various raw materials and supplies. You might be interested in management services agreements.
Starting a small business will also give you more time to further improve your product. Undergoing a massive overhaul for companies that employ around 200–300 individuals (factory workers, admin personnel, accounting and human resource people) with each department working in-sync with each other takes tremendous effort and massive costs. You may also see subscription agreement examples.
Even a slight change in product specifications will already cause the company to halt its operations and completely redesign the product to fit the change in the specifications. This is not the case for small businesses though as they can always modify their products on the fly with little to no costs at all.
Here are the essential elements of a small business investment agreement. The elements listed below are the standard in any form of business agreement. Although there are other elements and sections that can be added, don’t forget to implement the ones listed below.
An offer is an expression of willingness by one party to contract on certain terms with another party. The offer will be based on understanding that the general contract eventually becomes binding when it is accepted by the person to whom it is offered. An offer may be made in different methods (i.e., letters, email, direct messages in websites and other online platforms, or any tool that conveys the basis on which the offering party is willing to contract).
Acceptance is basically the final expression of consent to the terms of an offer. An offer is only accepted by the person to whom it is made unless an agent is being authorized to accept on behalf of that person. Additionally, the acceptance must be made in a form requested or authorized by the offering party. You may also see general partnership agreement samples and examples.
Parties in an agreement must be competent and in the right state of mind to enter into a simple contract. In general terms, most individuals are deemed to have the capacity to enter into an agreement unless that individual is a minor, incompetent or insane, or drunk or drugged when entering into the agreement.
In order for the agreement to be valid and enforceable, its subject matter or content cannot be prohibited by law or violate any public policy. An example of an agreement that is not enforceable is an agreement for the sale of illegal drugs. Another example would be a person not being able to promise to transfer clear title to real estate if the property is encumbered by a lien or mortgage.
In order for there to be an enforceable agreement, both parties must have a common intention or basically a “meeting of minds” on the terms of the contract. The parties must agree to the same thing, in the same sense, and at the same time.
Consideration is probably the most important element of an enforceable agreement. Consideration may be money or a promise (in this case, an investment). Whatever consideration or condition is provided under the agreement, it must be clearly agreed upon by both parties to the agreement, or it must be clearly implied and dully explained by the terms of the contract. You may also like mutual confidentiality agreement examples.
Check out the examples we provided so that you can create an effective and detailed investor agreement for your small business.