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Taking an investor for your business might seem like a good idea at first. I mean, it would save you thousands of dollars. However, this might not always be a good idea. 

As an example, Tina McGonagill wanted to expand her food container business and she thought about getting an investor to do the job. Tina met the investor at a trade show and she was able to secure a $50,000 investment from him. Consequently, Tina gave Trent Lowenstein a 20% stake in Big Fat Lunch. 

Reaching an agreement with the investor

However, the two weren’t in agreement when it came to the strategy that they will use to increase profits and that was one major problem for them. For instance, McGonagill wanted to order more stocks and hoped that Lowenstein would get the product into retail stores using his sales skills. 

 “Without stock, we have no business, because at the end of the day when you own a product your biggest priority is to get into retail,” she told CNBC’s “Money Court.”

Meanwhile, Lowenstein wanted to use social media and influencers to increase sales and with lower margins while increase profit on each product sold.

The debate between the investor and the business owner emerged when the business was slowing down, but it teaches us why discussing these details is important ahead of including an investor in your business, said Michael Goldberg, executive director of the Veale Institute for Entrepreneurship at Case Western Reserve University.

“If you’re an entrepreneur managing a small business, dealing with investors and their input can be time-consuming and counterproductive,” he said.

When looking for an investor it’s important to discuss the stake they’ll have in your company as well as what decisions they can and cannot make. Even before you are ready to take on an investor for your small business, Goldberg suggests first building and maintaining a network. If you engage with people before you have an ask, it sets the stage for when you are ready.

“Oftentimes, early investors come from friends and family,” he said. “It is also folks that you know through your high school, through your university, your business school, or professional associations.”

 “The expectation when you take in venture and angel investors is that it is going to grow very quickly and those investors need their monkey back at higher multiples than they gave it to you,” he said. “That can occur through a sale of a company or an [initial public offering].”