Investment Shark
Most of us are familiar with the popular television show, “Shark Tank” which featured entrepreneurs pitching their ideas or inventions to a group of billionaire investors in hope of getting them to partner in their businesses.
Although not in the billionaire category, a number of people are nonetheless approached by their children, other relatives, friends or acquaintances to provide seed money for business start-ups.
Becoming an Investment Shark: Empowering Your Children to Start Their Businesses
In the world of entrepreneurship, the term “shark” call to mind the image of powerful investors who make life-changing decisions. These so-called “sharks” are skilled at recognizing opportunities which offer high probabilities of success, taking calculated risks and plotting winning strategies.
For parents with the desire to cultivate their children’s entrepreneurial aspirations, opting to become an investment shark can be a transformation of sorts, as they help their offspring develop and grow their own business ventures.
It can be summed up in the familiar quote “Give a man a fish, and he will eat a meal. Teach a man to fish and he will be able to feed himself for a lifetime.”
1. Understanding the Role of an Investment Shark
As an investment shark, you are much more than just a financier. You are also a mentor, a strategist, and perhaps even a visionary, providing not only working capital but also direction.
If you wish to effectively support your children’s entrepreneurial ambitions, it is important for you to recognize and understand that you will be functioning in more than one role.
a. Capital Provider
Yes, you are a parent, but you are also an investor. As such, you will find it necessary to evaluate your financial situation and determine how much you can devote to fund your children’s businesses. This will require you to understand a number of unique funding stages such as seed funding, angel investing, and venture capital.
Is the money an investment, a loan, or a gift?
b. Mentor and Advisor
Your experience and wisdom can provide critical insights that your children might lack. This includes teaching them to find a way through
challenges, modify their business models, and form more effective strategies.
You are not helping your children if all you do is throw money at the project and then wonder later why it failed. You can’t go in halfway. Be professional and expect everyone in the company to be professional.
c. Network Enabler
Utilizing your extensive professional network to connect your children with people who can provide valuable assistance and improve their chances of success.
There is a lot of jealousy out there, and no doubt some people are envious of others who are able to take advantage of the benefits of knowing key people who are in a position to help them. I am of the opinions that there is nothing wrong with using connections that you already have established over a lifetime. Introducing your children to people with whom you have conducted business throughout your career.
Of course, it is important for all parties to understand that these advantages should not be unfairly exploited or taken for granted. A bit of mentorship may be involved with regard to teaching your children how to conduct business and maintain mutually beneficial relationships.
2. Building a Foundation of Knowledge
In your role as an investment shark, you must have access to and pass on to your children a solid understanding of entrepreneurship and fundamental investment principles. Here are a few ways to build that foundation:
a. Educate Yourself and encourage (require) your children to:
Read articles and books, attend workshops, and take advantage of online courses on a variety of subjects, including entrepreneurship, investment strategies, and business management.
b. Stay Updated by keeping up with the latest market trends, emerging technologies, and developments in your specific field. Subscribe to business journals, stay up to speed on what influential entrepreneurs have to say on social media, and take part in relevant webinars.
c. Learn from Other Sharks
Study and duplicate what you see successful investors and entrepreneurs doing. Reruns of “Shark Tank” or other similar TV shows can give you a look into how experienced investors evaluate businesses and make decisions.
Worth noting is the fact that you will have more emotional involvement if you are loaning money or assisting your children. To the best of your ability, keep the emotion out of it makes sound business decisions, and teach your kids to do the same. You can’t fit a square peg into a round hole. Sometimes you have to modify your dreams and your plans.
3. Identifying and Nurturing Entrepreneurial Potential
Get them started while they are young. If you want to support your children in their efforts to become successful entrepreneurs when they are adults, it’s essential to recognize and cultivate their potential from an early age. So, if you have to help them set up a lemonade stand or organize a garage sale, just consider it an investment in their future.
a. Encourage Curiosity and Creativity
Encourage an environment where curiosity and creativity can thrive. Provide opportunities for your children to discover their interests and explore with new ideas.
b. Teach Financial Literacy
Financial literacy is the cornerstone of entrepreneurship, yeah, so few people understand how to manage their money. Teach your children the fundamentals of living on a budget, saving, investing, and interpreting financial statements.
c. Promote Problem-Solving Skills
Help your children learn to recognize potential problems and develop possible solutions by incorporating vital skills, such as critical thinking and innovation.
4. Developing a Business Idea
Assisting your children as they develop a viable business idea is an important step. Here are a few suggestions as to how you can guide them through this process:
a. Brainstorming Sessions
Frequent brainstorming sessions open their minds and allow them to create and refine business ideas. Inspire your children to give thought to their passions, current and developing market needs, as well as potential solutions.
b. Market Research
Teach your children the basics of conducting market research. This typically will include anything from analyzing competitors to understanding customer needs, and identifying any existing market gaps that may reveal opportunities.
c. Feasibility Analysis
It is important to understand how to evaluate the feasibility of any business idea. Factors to consider include but are not limited to market demand, financial requirements to get the project up and running, day to day operational challenges, and potential risks.
5. Craft a Business Plan
Provide guidance in creating a well-structured, comprehensive business plan that will improve the following:
a. Executive Summary
A detailed overview of their business idea, their intended target market, and their unique selling proposition.
b. A Thorough Market Analysis
Do market research, finding the target audience, size of the market, and get familiar with the competition. What are your competitors doing right? What are they doing wrong? What can you provide to make you more valuable? And how will you get the word out?
c. Create a Business Model
How will the business generate revenue? Have a clear understanding of your pricing strategies, sales channels, and cost structure.
d. Know Your Marketing and Sales Strategies
Create an outline for the marketing and sales tactics that will be used to attract and retain customers.
e. Put in Place an Operational Plan
Determine the operational processes, including production, supply chain, and logistics. Create a training program that will enable everyone in the organization to know and perform their respective duties.
f. Have a Financial Plan
Prepare projected financial statements, including your funding requirements, and a break-even analysis. You need to be able to tell at a glance where you are at any given time with regard to working your plan and meeting your milestones along the way.
6. Providing Initial Funding
Once the business plan is in place, the next step is the point of no return. It’s time to pull the trigger, so to speak, and provide the initial funding. This requires careful consideration of the amount and structure of the investment:
a. Determine the Investment Amount Needed
Assess the funding needs based on the business plan and ensure you allocate a realistic amount to cover startup costs and initial operations. Just as important as not throwing away money unnecessarily is understanding the need to invest enough to get the ball rolling.
b. Structure Your Investment
Decide whether the investment will be a gift, a loan, an equity stake, or a combination of any or all the above. Clearly outline the terms and conditions to avoid future misunderstandings. It’s bad enough to have a falling out with a business partner. Much worse if that partner is a beloved family member.
c. Set Goals and Measurable Milestones
Establish clear milestones for the business to achieve to help in track progress and ensure funds are being used effectively.
7. Offer Ongoing Support
Your role as an investment shark doesn’t end with providing initial funding. Continuous support is crucial for the sustained growth of the business. If you’ve ever witnessed the birth of a foal, watched it struggle to its feet and make its first attempt at nursing, I think you would recognize the similarity with a new business. Both need help and encouragement at first. Then, if all goes well, both will soon be able to help themselves.
a. Regularly Scheduled Check-Ins
It’s a good idea to schedule regular meetings in order to discuss the company’s progress, challenges, and future plans. These meetings will provide opportunity for feedback and guidance. Communication is key throughout the lifetime of a business.
b. Mentorship
Offer mentorship in areas such as leadership, decision-making, and strategic planning. Your personal experience may help navigate some of the complexities of running a business, but don’t be shy about seeking the counsel of others outside your business, particularly if your role is primarily that of providing the funds and you have no experience in the type of business you are starting up.
c. Encourage Independence
While guidance is important, it’s equally essential to encourage independence. Allow your children to make decisions and learn from their mistakes. You aren’t going to live forever. Think of it as planting a tree that you will not live long enough to sit in its shade.
8. Leverage Your Network
Your professional network can be a valuable asset for your children’s business:
a. Introductions
Introduce your children to potential partners, clients, and investors. These connections can open doors to new opportunities.
b. Take Part in Networking Events
Encourage participation in industry events, conferences, and networking meetups. These platforms provide exposure and facilitate relationship-building.
Get to know others in the industry. Pick their brains. No doubt there will be mixed responses, but there is usually someone out there willing to help. Drive to the next town. Make phone calls. Join organizations and Facebook groups. Email people. Do Google searches. Do whatever it takes to gain as much knowledge, expertise, and experience as you can. Ask questions. Learn from mistakes and move on.
9. Scale the Business
Once your business gains a foothold, scaling becomes the next goal. Here’s how you can support your children through this phase:
a. Create A Growth Strategy
Assist as needed in developing a growth strategy that will include expansion of product lines, finding new markets, and growing the customer base.
b. Additional Funding
Determine the need for additional funding to support scaling efforts. This might involve seeking new investors or reinvesting profits.
c. Build Your Team
Guide your children in building a strong team. Emphasize the importance of hiring skilled professionals and creating a positive work culture, clear understanding of expectations, and proper training.
10. Prepare for Challenges—Because they ARE Coming
Entrepreneurship is loaded with challenges. Prepare your children to expect and deal with obstacles with strenght and flexibility:
a. Learn to Manage Risks
Develop risk management techniques, such as identifying potential risks, cultivating contingency plans, and diminishing negative impacts.
b. Sometimes Things Don’t Go as Planned—Learn from Failure
Encourage a mindset where failures are viewed as learning opportunities on the road of success. Share stories of entrepreneurs who have overcome challenges and grown their businesses.
11. Celebrate Successes
Boost morale and motivates continued effort by recognizing and celebrating your milestones and achievements:
a. Celebrate the Milestones
Key milestones definitely worth celebrating would include product launches, achieving sales targets, or procuring new partnerships.
b. Rewards and Recognition
Frequently acknowledge hard work and dedication at ALL levels of your organization. Everyone is important to your success, and an appreciated employee is a motivated employee. This could be in the form of awards, bonuses, or public recognition.
Conclusion
Becoming an investment shark to help your children start their businesses can be a rewarding endeavor that combines financial support, mentorship, and strategic guidance.
It is important to understand the multifaceted role of an investment shark. As you build a foundation of industry knowledge and work ethic, and nurture entrepreneurship, you empower your children to turn their business dreams into reality.
This journey requires not only patience, but also dedication and a willingness to adapt. The rewards—in terms of personal growth, family bonding, and the success of the ventures—are immeasurable. But the risks—strains on family relationships and financial losses—are equally immeasurable. With the right approach, you can pave the way for your children to become successful entrepreneurs, ready to make their mark on the business world.
Some of us actually want to provide the funding to get the businesses up and going. Others are reluctant, and find it awkward to say “No.”
Things could go really well.
And things could go really wrong.
More than money is at stake. Nothing will ever be the same if it does not go well.
Give it a lot of thought. Talk it over. Sleep on it. Measure twice, cut once, as the saying goes.