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How to research a company before you decide to invest

How to research a company before you decide to invest

Last updated 12th Apr 2022

The decision to invest in a company is a huge one, especially if you intend on putting a lot of money on the line. You can’t see the future – you can only arm yourself with a wealth of research when you’re determining whether or not a company will be the right investment for you. There are no sure things with investment, but thorough investigation can lead you to the closest thing to a sure thing you’ll be able to find. 

Do a news sweep

If you’re looking at a major company, they’ve likely come up in the news. You need to find out whether those mentions are mostly good, or mostly bad. If they’re facing lawsuits or backlash for poor choices they’ve made, they’re probably going to be hurting for a while. If the news says their competitors are crushing them, that’s something else you want to keep in mind.

Ideally, a news sweep will show you that they’re opening more locations, expanding, or buying out other companies. You want to find as much evidence as you can possibly find that suggests that they’re growing. You want your investment to grow with them, especially if you intend on investing for the long term

Listen to their employees

Employees use review sites, job forums and social networks to discuss their employment experience. If a company has a high turnover rate and their employees seem to be losing faith in them, that’s a sign that trouble is right around the corner. Of course there will always be employees who aren’t in love with their jobs, but many will complain of deep rooted issues within the company they work for. Have their been significant cutbacks in budget? Are they constantly understaffed? Is their product or service declining in quality? These are things you’ll need to know.

Check their financial data

The truth is always in the numbers. You want to research what a company is worth, as well as what they’ll be worth a few years for now. A number of databases exist that will allow you to research this information. You can use BizDB for the UK, CanadaBiz for Canada, and AuBiz for Australia to look at compiled info. You can see how many locations they have, their business identification numbers, how long they’ve been open, as well as any trading names or DBA aliases they use. Databases like these provide a wealth of details that you can use for thorough checks to verify a company. 

Watch their performance 

Some companies seek investors so that they can grow, while others seek investors to get them out of trouble. Monitoring their performance will show you exactly what you’re getting yourself into. Once you have your eyes set on a few eligible companies, watch them for a little while. If they seem to be behaving predictably in the market and fulfilling a lot of the goals they claimed they would achieve in a timely manner, this indicates that you can trust the company. After you’ve watched them for a month or two, decide based on the performance you’ve seen if the company is an ideal investment opportunity for you. 

Ultimately, you can do whatever you want with your money. Some people don’t mind taking risks with their investments, but other people want as much peace of mind as possible. Only invest when you feel comfortable. 

About Evie:

Evie Cooper is a project manager and content creator, supporting a data platform UKAreaCode. Apart from her work, Evie is also deeply interested in smart and efficient ways of achieving financial stability and independence. Feel free to reach out to her at @CooperEviee

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