When considering whether you’d like to start your own private equity company, keep in mind that you’ll need to provide most of the startup capital; only a small amount should come from outside lenders. Private equity companies have steadily grown in popularity since the 1970s. You’ll also need to be familiar with management buy-ins and buyouts. Your private equity company will be competing with other financial institutions that provide assistance, such as banks. Private equity companies make investments in private companies or they buy out public companies.
Write up a business plan, which will help guide you through the setup process of your company and will allow you to keep your goals in focus. You’ll also need to show potential lenders your business plan, so make sure to be thorough. In your financial information, include an executive summary, company details, your mission and vision, services, management details and financial forecast. Include cash flow and sales information, plus projected loss or profits.
Seek out investors who are willing to invest their money for a long period of time. Some may be willing to invest large sums of money.
Find a location for the company. Leasing a building instead of purchasing one can be more cost-effective.
Apply for a business license. There are different business licenses for different types of companies. Contact your local business department for specific details on the paperwork that you’ll need to fill out for the private equity company.
Market the business, particularly by using the Internet. Create a website for the business. If you’re not familiar with computer technology, you can hire somebody to build the website for you. Have business cards printed and hand them out to friends and family, asking them to pass them along to the people they converse with day to day. You also can distribute your business cards to local vendors.
You’ll want to set up a procedure for screening clients, since not every client who comes in search of your services will be good for business. You’ll want clients who will be able to repay the money that they owe. Screen them first to minimize your own losses.
Private equity companies often perform leverage buyouts, or LBOs. In a leveraged buyout, a large amount of debt buys a large purchase, such as a flailing company. The private equity company tries to improve the finances of the company and resells it to another firm.
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