When an entrepreneur finally secures an investor for their business, they may feel like the hard work is over. However, the process of finalizing the agreement with an investor requires a great deal of attention to detail to ensure that both parties are on the same page. The agreement establishes the terms of the investment and the relationship between the entrepreneur and the investor.

Below are some important points that entrepreneurs should keep in mind while finalizing an agreement with their investors.

1. Understand the terms of the agreement: It is crucial to understand the terms of the agreement before signing it. Entrepreneurs should review the document thoroughly, ask questions, and seek legal counsel if necessary. The agreement should include the amount of investment, ownership percentage, voting rights, the expected return on investment, and any other important terms.

2. Establish the duration of the agreement: Investors typically want to see a plan for how their investment will be used and the expected timeline for a return. The agreement should include a duration for the investment and a timeline for the business to become profitable.

3. Determine the level of involvement: The agreement should also establish the level of involvement that the investor will have in the business. Some investors prefer to be hands-on, while others prefer to be more passive. The entrepreneur should ensure that the level of involvement aligns with their vision for the company and the investor’s expectations.

4. Define the exit strategy: An exit strategy outlines how the investor will eventually receive their return on investment. Common exit strategies include an acquisition or IPO. The entrepreneur and investor should agree on the preferred exit strategy before signing the agreement.

5. Address potential conflicts: The agreement should address potential conflicts between the entrepreneur and the investor. Conflicts may arise over decisions regarding the business, financial statements, or other issues. The agreement should establish how these conflicts will be resolved.

In conclusion, finalizing an agreement with an investor can be a complex process with many moving parts. Entrepreneurs should take the time to understand the terms of the agreement, establish the duration, determine the level of involvement, define the exit strategy, and address potential conflicts. With a well-drafted agreement in place, both parties can feel confident in their investment and the future success of the business.