Angel Investment Checkup – Three Questions Predict ROI Potential
You’ve done the traditional due diligence and made an investment into a business. The typical investor/founder relationship entails regular meetings with financial reports and updates on the progress of achieving a business plan. Everything runs fine until there is a major change or crisis, which always happens, was not expected and clearly outside of the plan.
What is the ROI potential of your investment?
Ask yourself these three questions and choose 1, 2 or 3 that best represents your situation with your investment. Simply add the numbers together for a total score to determine the ROI potential of your investment.
What’s the state of the business since you first invested?
- Less than expected.
- As expected.
- More than expected.
Type of reporting?
- You only get regular financial reports with limited discussion.
- You receive meaningful analysis of financial reports and you are influential with key financial decisions being made.
- You engage in strategic discussions on the financial analysis and forecasting which includes key metrics that demonstrate whether or not the business is positioned for the next funding and growth stage.
Quality of relationship with founder and management?
- They call when they need money.
- You have the opportunity to offer advice during monthly or quarterly board meetings.
- You are a trusted adviser and mentor with deep understanding of key growth initiatives. You have opened your network for referrals to help grow the business. You are actively engaged at a strategic level and appreciated by the founder and management for your mature involvement.
Your ROI Potential Score:
Score of 3 or 4: No ROI potential. Prepare yourself for an impending major change, more likely a crisis that results in the loss of your investment and even worse, you get tied up in lawsuits for years.
Score of 5 or 6: Low to average ROI potential. Possibility to accelerate if it is the right management team. You’re essentially an absentee investor with a keen ability to invest into the right people who are experienced with proven credibility. You treat a direct investment into a business much like how you treat your stock portfolio investments. The business can weather a change or crisis because you have additional capital available, if and only if, management has the ability to manage change and uncertainty, restructure as needed and successfully turn the situation around. Your investment hinges on the quality of the management team.
Score of 7 to 9: Average to high ROI potential. Congratulations. High potential to accelerate ROI. You and the founder truly experience the joy of building something and creating wealth. The wealth is just a byproduct of creating value for customers and creating sustainable jobs. You have also endured multiple major changes and most likely a crisis or three sprinkled in along the way. Mature minds and wisdom always prevail because all the right stuff was done with the right people and right resources, at the right time. You and the founder have engaged the right expertise, including interim expertise, at the right time to close specific gaps and accelerate opportunities. Additional funding stages have already been determined based upon the fact credible expertise knows what key metrics must be achieved so new funds are strategically leveraged to close gaps and pursue high growth opportunities.
What does it mean?
The lower the ROI potential score the more likely you are in a crisis or one is brewing. If the score is in the mid-range, most likely some significant changes are in order. And, the higher your score the more likely the business is positioned for accelerated growth.
If you want a more in-depth review of the current state of your investment, contact the ZFactor Group at firstname.lastname@example.org. The ZFactor Group consist of highly experienced, credible business builders who are peers in all aspects of business growth, sales, marketing, financials, operations, leadership, systems integration, asset development and angel investing.
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