By Feruza Djamalova, co-founder and senior business immigration lawyer of Sobirovs Law Firm.
Investment immigration to Canada is a popular topic these days. Many investors and entrepreneurs worldwide are increasingly choosing Canada as their destination for doing business and growing their investment portfolio. Perhaps one of the most frequently asked questions is, “What is the safest way to invest in a business in Canada?”
In this article, I want to share some ideas on how foreign entrepreneurs and investors can reduce risks when investing in a business in Canada. My suggestions are based on my observations of our clients’ investment immigration journey and should not be considered legal advice.
Business Investment Strategies For Immigration And Profit
Below are my top three investment strategies for foreign entrepreneurs who want to invest in Canada.
1. Look beyond a company’s books and standard due diligence.
Invest in a business that is already profitable and has been profitable for several years. Usually, everyone does due diligence, examines a company’s books and liabilities, etc., and calculates return on investment (ROI). They also ask the owner to provide some training after the purchase. However, you should go beyond financials and understand what makes this particular business successful.
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Understand what features of the business make it successful. What is its business model? What is its market positioning? Pricing strategy? Marketing strategy? Who are the main customers, and why do they buy from that business specifically? What are the most frequent complaints or positive feedback from customers? What is the most popular product or service? Where does the business get its products from? Who is on the team? Are they staying? What training is required to maintain success? Observe employee engagement. Ask difficult questions. So, dig deeper—look beyond financials and due diligence; examine the business model and understand the systems behind it and the key success factors.
2. Find a strong local partner with relevant experience and co-invest.
You may have narrowed down a particular sector you want to invest in, but you may not know the operational specifics of the business in that sector. You don’t need to know everything about a business, but you might need an experienced partner. A partner could be an individual or company that needs capital to expand or complete a project. This piggybacking allows you to benefit from the expertise of an already established company/individual in Canada and provides a solid market entry strategy.
For example, a real estate development company needs further capital injections to complete specific building projects they currently have. Co-investing in the same project with an established and successful company can help foreign investors gain expertise and earn profits. You end up investing in your sector of interest and receive help with the business from an experienced partner.
3. Invest in a company that has sufficient assets to offset potential losses.
Investing in a business with good assets can be beneficial for several reasons. If the business has valuable assets, then these assets could be utilized to help the company in times of financial need. The resilience of your investment should be at the top of your list when assessing potential businesses. On the other hand, these assets could be used to show the financial stability of the venture when seeking loans and an influx of investment capital.
When looking into assets, you should focus on real estate, equipment and other tangible or intangible assets. Does the business own the commercial building it is in? Does it own part of it? Does the business own the equipment that it uses to operate? For example, a garage that owns the building, the heavy-duty hoists and all the equipment is much more valuable than a garage with no assets. You can even look further into the intellectual property that the business might own. Some businesses have well-developed trademarks that can secure specific market areas for several years in the future.
Low-Risk Business Ideas
Since you now know the benefits of investing in an existing business, let me share some interesting business ideas for investment immigration.
1. Medical Clinics
Healthcare is one of the most important sectors in Canada. Numerous successful medical clinics around the country are ready for expansion. However, for one reason or another, they might not have liquid funds to finance a new location or purchase new medical equipment. This is where you, a foreign investor, come into their business. You can finance their expansion ideas for part ownership of the new or existing clinic location.
The healthcare industry is one of the few examples where revenues don’t seem to slow during tough economic times. By investing in a highly stable industry, you practically secure your investment for decades. This is especially important when your financial investment in a Canadian business directly influences your immigration application outcome.
2. Bakeries With Real Estate
Plenty of successful bakeries have solid contracts to supply supermarkets with baked goods. They are ready for more contracts but may be struggling with hiring new staff, need more space or face other production constraints. Your investment will solve their problems, and they will be able to increase their revenues by securing more contracts.
The best thing about bakeries, or any brick-and-mortar business, is that some own the commercial space they operate from. Investing in a real-estate-backed business makes your investment more secure and might create more financial gains for you in the future.
3. Ghost Kitchens
Ghost kitchens are industrial-size kitchens that can be rented for short periods by anyone. In Ontario, these kitchens are usually booked for several months ahead. Like with any business, some of these ghost kitchens struggle to expand, which your investment can help with. You could help the businesses open more locations or invest in new equipment to attract more clients.
These ghost kitchens fall into a high-demand and high-efficiency business category. People always want to use their services for their culinary production needs. These businesses are also masters of increasing efficiency in utilizing space because some are open around the clock, seven days a week!
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.