Ontario business law can be complicated. I was reading that Manulife Financial had done a report on investor sentiment in Canada. The report said that Canadians no longer had much confidence in mutual funds, real estate, and exchange-traded funds. We frequently read about how the real estate market in Vancouver is out of control. Investors bearish of Canadian market seem to be in all the papers.
The report said that investors in eastern Canada were the most positive where as investors in provinces such as Quebec and Alberta were the most skeptical. Frances Donald who is the senior economist for Manulife Financial said “Canadian investors are facing a long list of uncertainties.”
Read more about Ontario business law: Toronto Business Lawyers
Investing in franchises in uncertain markets can be a fantastic choice. It reduces a lot of the macroeconomic risks of other asset classes that are dependent on interest rates or currency exchanges.
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Many people will invest in some class of securities (stocks and bonds), business, or franchise at some time in their lives. If you have a managed pension plan at work you are an investor. We constantly read about businesses that are doing well and making their investors a lot of money and about the businesses that go under. I have put together a list of 5 things you need to do before investing.
Understand the business
Never invest in anything if you don’t understand it. Take your time to research the industry and business model. If after speaking with the investment advisor or salesperson you still don’t fully understand the plan, do not invest.
I know of people that have invested in stocks such as Twitter that have never used Twitter before. They took their advice to buy from an online stock show. This is risky and careless.
Have tough conversations early
Do not wait to ask questions. Let the investment advisor or sales person know what is important to you upfront. Are you afraid of the risks? Do you need a 10% return? Is the location of the business the most important thing for you?
At the end of the day investing should be simple. The investor wants to receive a good rate of return and the company is typically trying to raise money to expand. If you are upfront with your needs you will get a fast answer as to whether the investment will work for you.
Speak with a lawyer at the right time
If you need help with Ontario business law, reach out to a law firm. Most people know that they should speak with a lawyer before signing complicated legal documents. However, many lawyers will advertise themselves as lawyers that can help you with any of your needs. Whether you are going through a divorce, got arrested, need to buy a house, are buying a business… They can help you.
Do not hire those lawyers. Find a lawyer with business experience or if investing in a franchise, hire a franchise lawyer. Make sure they spend a majority of their practice in these areas.
Timing is also important. Speak to a lawyer as early on in the process as possible (once you have your documents.) If you wait to the last minute to visit a lawyer it will upset the other party if there are major last minute changes needed.
You don’t want to hire a lawyer too early in the process before you are sure you want to do the deal or you will waste money.
Speak with the owner or CEO
Decisions come from the top down. You may know the salesperson or investor relations manager of the organization very well but you should at least ask the owner or CEO some questions (even if it’s over the phone.) Ask them about their vision and where they want to take the company.
Know the exit strategy
This is something your business lawyer might be able to help you with. However, you should give it some thought yourself. What would you do if things didn’t go as planned? What happens if the investment is doing very well but you need to move on due to retirement? The plan should be well thought out.
That was our list on 5 things you need to do before investing.
Are you interested in starting a business in Canada?
There are many different options when starting a business. All of them involve you having enough capital to either make an investment or to be able to self-sustain for the lean first few years.
As you can imagine from the name of this website, we are believers in the power of franchising or making an investment into an existing company. I read somewhere that 50% of businesses fail within the first two years, but only 10% of franchises fail in the first two years.
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Recently, I have found something that I believe is even better than franchising. It is my personal opinion that structuring your business for investment as a joint venture gives you much more freedom to enter into mutually beneficial terms with your investors. Instead of having legislation dictate the terms of your agreement you can negotiate!
This only works until you open around 15 locations. Eventually, you will have to switch to a franchise system where you can offer “cookie cutter” businesses in any new market.
Canada is a great place to start a business.
Making the decision to open a business is difficult.
Before you decide to open a business, have a look at your competition. Competitive pressure among existing firms depends on the rate of industry growth. In slow-growth settings, competition is more heated for any possible gains in market share. High fixed costs also create competitive pressure for firms.
Service organizations throughout the world have learned that today’s customers are very demanding. Companies have to offer both high-quality products and outstanding service at competitive prices. Business is becoming customer-driven, not management-driven as in the past. This means that customer’s wants and needs must come first.
Ontario Business Law
To meet the needs of customers, firms must give their front-line workers empowerment. This means that the office clerks, front-desk, and salespeople have the authority and freedom to respond quickly to customer requests.
The franchise contract is the all-important document that binds the franchisor and his franchisee together, for better or for worse.
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The terms of the franchise contract are frequently for a period of 10 to 20 years and should include provision for renewal at the time of termination.
It is important that the contract covers all matters relating to the operation, including the rights to inspect and audit.
It should cover all possible eventualities. Think about if the franchisee wants to sell out? What happens if he/she dies? What happens if his particular operation is unsuccessful? Have assets and equipment been assigned to the franchisor in case of default by the franchisee?
The contract should also deny the franchisee any opportunity to compete with the franchisor, or to introduce products or services that are not approved. It should also include non-disclosure clauses to prevent operational and financial information from falling into outside hands.
If you need help with Ontario business law, reach out to us via the live chat function in the bottom right of the screen.