A Guide to Due Diligence and Risk Assessment

Key Takeaways:

1. Investing in private businesses is becoming mainstream and is no longer limited to the wealthy.
2. Due diligence is crucial when considering investments in private businesses.
3. Understanding the business idea, assessing risk and return, and conducting financial due diligence are essential steps in evaluating private investments.
4. The management team's competence, confidence, and alignment with the business idea are important factors to consider.
5. Having a clear exit strategy is crucial to ensure liquidity and potential returns on investment.
6. Investments in private businesses should align with personal goals and risk tolerance.
7. Diversification is key to managing risk and optimizing investment portfolios.

 

Chapters:

Timestamp Summary

[0:00:37] Introduction to investing in private businesses

[0:01:57] Private equity becoming mainstream

[0:02:30] Offering due diligence consulting for private investing

[0:03:28] Banks are not lending as much, increasing need for private capital

[0:04:19] Principles to evaluate private companies

[0:05:08] Understanding the business idea and market potential

[0:06:45] Assessing risk and return

[0:07:31] Financial due diligence

[0:08:14] Evaluating the management team

[0:09:11] Importance of exit strategy and alignment with goals

[0:13:37] Valuations and funding in the money management industry

[0:14:23] Negotiating terms and assessing risk in investing

[0:14:46] A cautionary tale of investing in a private company

[0:15:18] The importance of having a process for investing in private equity

[0:15:36] Warning of potential losses in the future

[0:15:54] Conclusion and contact information for help with investing

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Phillip Washington, Jr. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.