10 tips for a successful investment in SMEs
There are many opportunities to invest in different areas. However, investing in SMEs is interesting in more than one way: growth sector likely to experience rapid growth in the coming years, hence the possibility of obtaining a significant positive ROI, existence of favorable tax measures , etc. However, there are many things to consider. AfrikaTech invites you to discover its advice for a successful investment in SMEs.
1. Access information
To successfully invest in one or more SMEs, it is essential to be able to access information, in other words, to know the financial health of the SME over the last years.
These documents must be associated with annual results reports as well as a memorandum explaining the nature of the shares, the terms and conditions governing the capital increase, etc.
2. Favor a business leader who listens to shareholders
By communicating regularly with shareholders, the company manager proves that he is listening to them and takes their comments or suggestions into account. This communication can take the form of sending excerpts from articles in which the SME is mentioned, by notes retracing the development of the company, etc.
A business owner who refuses to communicate with shareholders is often likely to want to disguise the real financial situation of the SME.
3. Media coverage of SMEs
To present its added value and make itself known, it is essential to check the media coverage enjoyed by SMEs. Ensuring an active presence on the media scene aims to contribute to the good development of the company.
Is the leader regularly solicited by the media? Does it intervene punctually across all communication channels?
4. The growth project: an essential prerequisite
Investing in an SME implies turning to a company for which the manager has developed a real growth project. Indeed, the capital increase should make it possible to finance a medium-term operational investment with the aim of improving the operating result of the SME.
No investor will accept that this capital expansion is intended to reimburse financials, for example.
5. Expertise in the service of valuation at the right price
When an SME increases its capital by raising funds, it is essential to have the valuation carried out by a firm of independent experts whose know-how is guaranteed. This practice aims to prevent possible overvaluation.
6. Control of the tax situation of the SME
Investing in an SME gives individuals the right to benefit from an 18% reduction in their income tax as well as a 50% reduction on the ISF.
The company manager must therefore transmit the eligibility certificate stipulating that the SME can benefit, in accordance with the laws in force, from said tax reductions. This certificate can be produced in the event of an irregularity by the manager of the SME.
7. End your investment
Investing in an SME is relatively easy to do. On the other hand, it is difficult to get out. This exit requires setting up a specific financial package.
This premature departure is usually accompanied by financial penalties, loss of the company, etc. Anticipating its exit from the investment helps cushion financial losses. In such a case, it is advisable to turn to quotation on a market.
8. Limit intermediaries
Investing in an SME often involves resorting to intermediaries. However, the greater the number of negotiators, the lower the profitability of the investment.
Commissions (registration fees, administrative fees, application fees, etc.) can be expensive or even abusive. To limit these additional costs, opt for direct investment.
9. Ensure regular monitoring of its investments
Investing in an SME should be considered for the long term. During this period, the SME must play the card of transparency with you.
For your part, you owe it to yourself to follow the evolution of your investments and not to be satisfied only with annual general meetings.
10. Diversify your investments
To limit the risk of loss of capital, it is recommended to invest in several SMEs operating in different business sectors and geographic areas.
By relying on these tips, your investment will turn into success.