“Form of Value #12: Capital”

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What is “Capital”? (Form of Value #12 of 12)

“Capital is that part of wealth which is devoted to obtaining further wealth.” — Alfred Marshall, economist and author of Principles of Economics

Key Points:

• Capital is the purchase of an ownership stake in a business. If you have resources to allocate, you can provide capital to business owners to help them expand their business.
• To provide capital you must:
  
  
  
  • Have available resources to invest.
  • Find a promising business in which you’d like to invest.
  • Estimate the business’ worth, its future growth, and the possibility of negative scenarios that would cause the loss of your capital.
  • Negotiate the amount of ownership to receive in exchange for the capital.
• By taking on investors, business owners can gather enough funds to expand quickly.
• By acquiring a certain percentage of the business, investors benefit from its activities without active involvement. Investors hope to receive a higher rate of return than other methods, like leaving the money in the bank.

Questions for Consideration:

• Does delivering value via providing capital make sense for your business idea?
• If so, what do you need to plan for to make it successful?

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