I Need Some Advice! Silent Investor wants to invest $65,000 in my company!

13 years ago

I think 50% is too much if he is only giving you money.

There are ways to grow your business without needing any capital. If your company is making money reinvest it. Find ways to get monthly income.

If I had $65k why would I give it to you when I could fund my own compeating business? You should be thinking that when the guy is offering you $65k.

Why does he need you? To work the business for him. He likely just wants to site back and get great ROI.

Why do you need him? I guess to grow faster but unless this is a side job you should be able to do that by just hiring sales people even if they are 1099 contractors.

Now if you decide you do want to do this lay down a few ground rules.
1. You get paid a salary plus commission if you will still be selling.
2. You will take no less than a 51/49 split so you still control the company. Depending on what the deal could do for you vs what you are doing now talk him down to 20/25% if you can.
3. If he plans to be a silent partner he is just that. Unless you think he brings value besides the money to the table.

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JRampage

13 years ago

The 65k would only make you a puppet. The whole reason people get into the internet business is to be their own boss. Unless you really need the investment that i would suggest get a smarter investment plan. Something that gives you a bigger cut at the end of the day. Spread 65k over 2 - 3 years. Make it sound like a loan repayment plan.

Originally Posted by Aaron Doud

I think 50% is too much if he is only giving you money.

There are ways to grow your business without needing any capital. If your company is making money reinvest it. Find ways to get monthly income.

If I had $65k why would I give it to you when I could fund my own compeating business? You should be thinking that when the guy is offering you $65k.

Why does he need you? To work the business for him. He likely just wants to site back and get great ROI.

Why do you need him? I guess to grow faster but unless this is a side job you
should be able to do that by just hiring sales people even if they are 1099 contractors.

Now if you decide you do want to do this lay down a few ground rules.
1. You get paid a salary plus commission if you will still be selling.
2. You will take no less than a 51/49 split so you still control the company. Depending on what the deal could do for you vs what you are doing now talk him down to 20/25% if you can.
3. If he plans to be a silent partner he is just that. Unless you think he brings value besides the money to the table.

You're the Shepard who guides lost lambs on the internet. Solid Advice and I agree.

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Mwind076

13 years ago

Aaron has it covered. I'd be wondering why he won't start his own company with that money. Chance are, he doesn't know what he's doing enough to do it. Yes, you should work together since you both have a need for the other, but %50 is HIGH. You will lose the "ownership" feeling that you make the call. I wouldn't want that.

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DesertSand

13 years ago

40/60 Split. He'll have to deal with that. You're doing all the work.

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ebizman 13 years ago

Originally Posted by DesertSand

40/60 Split. He'll have to deal with that. You're doing all the work.

just what i was thinking...hmm..
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tonypilot7

13 years ago

Congrats on having a business that is attracting outside money. But I think you should take a step back and really consider what your investor is offering..

You state that you can earn 50k per month with that kind of capital but what will be your net? You will be taking on a lot of overhead to get there, and there is nothing wrong with that, But you will also be giving up 50% of the net.. So you get all of the worries/hassle for only half the payout.

I think there are many ways you can take your business to that level without the need for outside capital and giving up equity.. Consider joint ventures instead of hiring sales staff, outsource your fulfillment so that you don't have the overhead (paying internal employees) until after you have been paid for the service.

Keep your business running lean expense-wise, focus on paying for results and you can grow quickly without the need for external capital and the dreaded equity split that your investor is asking for.

If you do decide to take on the capital, look at the deal from his side, he will be getting how much return per month on his 65k? 25k gross, but after expenses? 10k per month?

almost a 200% R.O.I. per year at those hypothetical numbers... A bit steep in my opinion, but that's just me.

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ebizman

13 years ago

hes investing the money because hes not familar with this business, he's made money in other industries, and just wants to be silent investor.

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DesertSand

13 years ago

Draw up a contract first and foremost. If he's and actual investor, he will know its value.

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Jason Kanigan

13 years ago

Never give away equity. It can be very difficult to get back.

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Carl Fridsjö

13 years ago

Originally Posted by Jason Kanigan

Never give away equity. It can be very difficult to get back.

Right... never do it. Just look at how it played out for Mark Zuckerberg. Imagine if he would own 100% of facebook.....

Geez, there's a lot of stupid advice in this thread.

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Jason Kanigan

13 years ago

Originally Posted by Carl Fridsjö

Right... never do it. Just look at how it played out for Mark Zuckerberg. Imagine if he would own 100% of facebook.....

Geez, there's a lot of stupid advice in this thread.

LOL

(you really did make me laugh out loud, Carl--because you're right).

So how did their IPO go?

Anyhow, I should have temporized. I will do so now.

Never give away equity when you are just growing your business. In the baby stages, giving away 50% for $65K may seem like a good plan, but what if you're sitting on a $50,000,000 idea? 50% of that is worth a whole lot more, isn't it?

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Aaron Doud

13 years ago

Split percentage matters for control.

Salary/commission for you is how you make sure you get paid before he does and more than he does.

These are two seperate issues and both need to be addressed so please remember that.

Here is a possible structure that may work depending on your business.

Your title: Managing Partner
Salary : $70/k per year
Commission: Same as sales people for direct sales from you
Bonus: 10% of net profit

Than you can split the left over profit based on your agreed company split percentage.

That above Pay Structure is based on similar pay structure I have had as a sales manager.

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Claude Whitacre 13 years ago

Aaron gave you some real world advice.

My question is, why do you need $65,000? I think you need to work. Are you on track right now to earn that much net this year? If you are, you don't need the money. If you aren't the investor is making a mistake, and you're a bad bet.

If you have any kind of track record, that would give a real investor a reason to trust you with $65,000...you would make that money quickly anyway.

The exception is if the investor is a close relative...and it's really a gift.

But there are really only two outcomes;
1) You become incredibly successful, and you start to HATE your partner because they own half of the company that YOU built...for a paltry one time investment of $65,000.
2) You fail. You don't know what you are doing, lose the money, and your investor hates you.

Either way, it likely will end not the way you plan.

And if your investor is a close relative...Thanksgiving dinners will never be the same.

Grow slowly. The education is worth more than the money, and you won't be up nights trying to think of a way to explain why you aren't making a profit on someone else's money.

The only time an experienced investor would give you money is if you are already selling so much that the money would be used to support the demand you created.

Sales come first. Then money.

I have been asked to invest in about a dozen "Businesses". Mostly by relatives. They want money first...then after they buy office furniture, hire a staff, and hire salespeople....they will start worrying about sales. Wrong formula.

And did you know that if you loan money to anyone, and they don't pay you back...they start hating you? I speak from experience.
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vndnbrgj

13 years ago

I would look at a royalty option.
Maybe a 25% royalty until his investment is returned.
At which point the royalty goes down to 15% with a buy-out option.

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ebizman

13 years ago

this is not a relative, strictly an investor I met in my local area.

this is definitely a tough decision

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Claude Whitacre 13 years ago

Originally Posted by ebizman

this is not a relative, strictly an investor I met in my local area.

this is definitely a tough decision

Two things;

Sorry about all the "relative" stuff. I was projecting.

Have you guys noticed that in many many threads, a question is posed...several of us invest time giving our best opinion and help....and the OP seems to disappear? But we keep offering advice?

I think that's pretty interesting by itself.
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mjwillyone

13 years ago

If you are making decent money .. save some, pay your expenses, and reinvest in the company to see continued growth. If you were approached, say no if you can find any other way to keep the business growing. I wouldn't touch this if I were you!

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Mr. Subtle

13 years ago

Originally Posted by ebizman

I have a silent investor who I've been getting to know for some months now, and we've been talking about him potentially investing $65,000 in growing my offline business -this would be a HUGE opportunity, because I can make $50k+ per month with that type of funding to setup a sales team, leads, small office space..

What are you making now (per month) to warrant some guy dropping $65k in your lap?

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DaniMc

13 years ago

Be very careful here.

He is valuing your business at 130k.

He is buying permanent ownership. Do you think that in the next five years your business will make more than that? Hopefully a lot more. If so, this a bad move for you.

The only way this works in your favor is if you will make less than that amount and you retain majority ownership.

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John Durham

13 years ago

I would give him 5%, and get the whole budget upfront...dont let him pay you measly installments.... at least 50% of front.

He will probably run from that, but if so he isnt a serious investor, and he aint planning on being silent.

If you give away the farm, and he owns you , you will regret it later. I would also pay him out of net, not gross.

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fastviper 13 years ago

Originally Posted by ebizman

hes investing the money because hes not familar with this business, he's made money in other industries, and just wants to be silent investor.

I don't know your sales or potential so This is shooting from left field. But the guys above who would take a 60/40 or 50/50 split for 65k, most likely have not had investors in anything.

You should ask him what he wants.

And if it is 60/40-50/50 dont walk run.. 65k is nothing.

But if you need the money, and you think he wants a ton of ownership, propose it to him like this.

We will split the shares 50/50.

You want a salary of X, plus a bonus of Y for working the business. After that we split the profit by % owned.

That is until he gets his original investment back, then you have the option to buy back his shares, down to say 10-20% for another $65k.

He wins, cause he gets his $65k back, you win cause you can buy 30-40% of the shares back for 65k, if in case it blows up to a 5 million dollar business.

Never give your life away for 65k...
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Rus Sells

13 years ago

I'd tread really carefully here. He's asking for enough control of the company to cause you problems down the road if he decides he doesn't want to be so silent any more.

Also how have you valuated that company currently? Do you know what its worth?

Do you also know in what time frame the investor expects to make back his investment?

John mentioned to offer him 5% for half the investment which would be an initial investment of $32,500 you're asking for, but it also says you value your company at $650K. I would not go this route because the investor will know instantly you have no clue and will run like crazy from the deal.

Also, has the investor asked you any questions as to your costs, gross sales, etc. etc.

If he hasn't bothered then that would be a red flag to me as well. People don't just throw money around without doing due diligence unless of course they need to take a loss for tax purposes. lol

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speez

13 years ago

Lets not forget he is offering to risk 65000$ of his hard earned money in an economy where banks aren't lending to small businesses in this environment, if you really need the money and you think you can't access funds anywhere else to grow, the I'd seriously consider it. 50% of a big pie is better than 100% of a small pie.

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sandalwood

13 years ago

Originally Posted by ebizman

Yes, I have a silent investor who I've been getting to know for some months now, and we've been talking about him potentially investing $65,000 in growing my offline business -this would be a HUGE opportunity, because I can make $50k+ per month with that type of funding to setup a sales team, leads, small office space..

The only downside would he would want 50% ownership in the company..

I've made some decent money in offline now and could continue to grow slow... or get funding.

:confused:

I've re-read your post and highlighted what I think is important in your presentation. It appears you only think he would want 50%. You didn't say he has said definitely he would want 50%. What makes you think he wants 50% since you are on only talking terms. No investor I know of walks up to a guy and says hey, I have 65k. Give me 50% of your company and I'll give you the 65K.

If he did do that, don't drink the kool-aid. If he hasn't done that, you now know he might probably have 65K to invest. How much of your company do you want to option off, not sell, but option to this guy for the 65K?

I'd also make him qualify that he has an honest to God 65K he can freely sling around. but that's just me. We were gonna sell our agency last year and part of the process was qualifying the buyer. Amazing what happens when you ask them to produce their side of the ledger. Some don't expect to hear that question cuz they think you are the only who has to produce the numbers.

Anyway, take what you want from my comments and I wish you luck.

Tom

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Marvin Johnston

13 years ago

Does he bring anything else to the table that will help build your business. I hope the answer is yes.

And have you done any research on this person, i.e. checked out their past history? Or are you just taking their word for it?

With just the information you've presented, I'd be very reluctant to pursue it any further.

Marvin

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mvwolf

13 years ago

Originally Posted by ebizman

Yes, I have a silent investor who I've been getting to know for some months now, and we've been talking about him potentially investing $65,000 in growing my offline business -this would be a HUGE opportunity, because I can make $50k+ per month with that type of funding to setup a sales team, leads, small office space..

The only downside would he would want 50% ownership in the company..

I've made some decent money in offline now and could continue to grow slow... or get funding.

:confused:

Well, if it's good or bad depends on many things. There are many businesses whose founders completely lose ownership of the company by giving % to investors.

On the other hand, many businesses would not be brought to life without the support of investors and partners.

Analyze the situation a little better.

1. Maybe your investor wants to negotiate? Are you sure that is not the first offer, and he expects to hear your answer?

Because in (serious) negotiations both sides initially give crazy offers. Such as negotiations between the company and the union. "We want that you increase our salary by 1000%" "We want that you work for free" And then they lower/raise offers until they reach a common ground.

2. What is your company worth?

If your company worth is $ 5,000 then you should take the $65,000/50%. If what you have now is worth $ 150,000 then you should seek slightly higher percentage.

3. Can your company thrive (not to mention survive) without investment? Because maybe you don't have other options.

4. I would hire a lawyer if I were in your shoes (Before you enter into negotiations with your investor)

5. Are you absolutely sure you can "make $50k+ per month with that type of funding"? Why are you sure? What are the evidence in support of the claim? The goal here is not to rush, it's to make the right decision and not getting into debt.

There are many more things to consider here...

For start look at video - *I can not post links so if you wish you can go to youtube and search "Raising money for a startup khanacademy", although this example is not like yours, you will dig a little deeper into issues you may or may not have explored.

To conclude, you need a serious analysis on all aspects of your "opportunity"...

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globalpro

13 years ago

Maybe find a corporate attorney, CPA or someone who specializes in investments and ask how things like this usually work.

Sounds more to me like as an investor, it should operate similar to buying stock in a business where a dividend is paid, or something like that.

Unless he is wanting to buy into your company as a partner. Then the ones that said you get the bigger return based on doing all the work would be the way to go.

John

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IM Lover

13 years ago

Your making $50k+ per month and your thinking about giving up 50% of the business, for just $65,000 are you serious?

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atrbiz

13 years ago

think about it...you're giving away equity in your company like others have said!...not something you can easily get back, continue to grow your company by re-investing your profits back into the business.

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iAmNameLess 13 years ago

Originally Posted by Prevalent

Be very careful here.

He is valuing your business at 130k.

130k eval might be good for him. That's a lot of equity to give away... but if you need the money and can get 50k/mo then you're doing 600k gross a year.

Are you incorporated? Don't sign a non compete, and don't do it as a sole prop.
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wildirishtime

13 years ago

I always have feared taking money from someone. You'll be someone's bitch for an unknown period of time. I think bootstrapping is the preferred method always. If you only bring $1k to his $60k, you've only got 1/60th of the ownership if you ask me.... and that's too much leverage for me.

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iAmNameLess

13 years ago

Originally Posted by wildirishtime

I always have feared taking money from someone. You'll be someone's bitch for an unknown period of time. I think bootstrapping is the preferred method always. If you only bring $1k to his $60k, you've only got 1/60th of the ownership if you ask me.... and that's too much leverage for me.

That's not how it works though. If he's investing 65K but ebizman is only doing 3-4k/mo himself, it is a no brainer. He's getting a 130k evaluation which is probably more than what its worth. 50% is a large amount of equity, but might be worth it in this situation.

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Rus Sells

13 years ago

In reality his company is probably worth nothing because if he has a car wreck and is laid up in the hospital for months on end does the company still go on?

I don't mean this as an insult but its a hard reality we need to understand. To us our business is always worth something because our business and us are synonymous with each other.

Unless you've incorporated and have a clear cut plan that dictates what happens should you be laid up or even depart, and you have others in place to continue running the company and delivering services, as far as valuation you don't have squat really.

Originally Posted by iAmNameLess

That's not how it works though. If he's investing 65K but ebizman is only doing 3-4k/mo himself, it is a no brainer. He's getting a 130k evaluation which is probably more than what its worth. 50% is a large amount of equity, but might be worth it in this situation.

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sandalwood

13 years ago

Originally Posted by Rus Sells

In reality his company is probably worth nothing because if he has a car wreck and is laid up in the hospital for months on end does the company still go on?

I don't mean this as an insult but its a hard reality we need to understand. To us our business is always worth something because our business and us are synonymous with each other.

Unless you've incorporated and have a clear cut plan that dictates what happens should you be laid up or even depart, and you have others in place to continue running the company and delivering services, as far as valuation you don't have squat really.

Rus,

Good point about ending up in the hospital. Since we sell insurance here comes an insurance "pitch." Your comment tickled my brain into realizing, or maybe making up numbers you decide, that a lot of the offliners are sole proprietors or two man/woman operations.

The sad truth is neither of them has any kind of disability or other protection type of policy to help in case that car wreck happens or the meningitis outbreak hits them (30 dead as of this writing) or some other catastrophe.

Yeah, I know, everyone has huge recurring income from their giant client base --- until they don't.

Since this is a soft pitch and I don't sell in your state look at your biz plan and see what you included for the dark days of summer. Most local biz people I know in my area haven't done s*** in that arena and won't even talk to me about taking care of themselves.

But, after the crap hits the fan, they want me to backdate an application. Yeah sure buckoo...

Not meaning to lecture but what have you done to protect yourself in case you become a Christopher Reeves or Daryl Stingley or Nick Bunnoconti Jr?

You made a good point Rus and I took it a step further cuz reality is reality especially when it happens to you.

Tom

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Rus Sells

13 years ago

Having insurance sort of conveys that you are serious about your business.

I believe you can also get a policy that can cover past work or business as well. You'll pay for it though.

Since many are sole proprietors having a nice sized life insurance policy is a way to back the overall financial landscape in your life & business, coupled with general liability business insurance with E & O you'd have more on the table should a legit investor come calling so to speak.

Originally Posted by sandalwood

Rus,

Good point about ending up in the hospital. Since we sell insurance here comes an insurance "pitch." Your comment tickled my brain into realizing, or maybe making up numbers you decide, that a lot of the offliners are sole proprietors or two man/woman operations.

The sad truth is neither of them has any kind of disability or other protection type of policy to help in case that car wreck happens or the meningitis outbreak hits them (30 dead as of this writing) or some other catastrophe.

Yeah, I know, everyone has huge recurring income from their giant client base --- until they don't.

Since this is a soft pitch and I don't sell in your state look at your biz plan and see what you included for the dark days of summer. Most local biz people I know in my area haven't done s*** in that arena and won't even talk to me about taking care of themselves.

But, after the crap hits the fan, they want me to backdate an application. Yeah sure buckoo...

Not meaning to lecture but what have you done to protect yourself in case you become a Christopher Reeves or Daryl Stingley or Nick Bunnoconti Jr?

You made a good point Rus and I took it a step further cuz reality is reality especially when it happens to you.

Tom

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Pierre! 13 years ago

ebizman

Friday night - Shark Tank is on... You will at least get some perspective.

Good Luck on The Decision!

Either way you go, set your jaw and work it...

God Bless,
Patrick
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- netkid 13 years ago
  
  Two things here:
  
  1) Did you do background check on this investor? Is he/she the real deal. I would investigate this person's full background first. How do your REALLY know he has the money?
  
  2) Instead of letting him invest, why don't you just sell your business to him. That way you keep the 65K up front and set up a consultant fee or salary for yourself to keep running it, teaching him the system you put in place, and then exit. That could be your exit strategy.
  
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Nspire

12 years ago

Originally Posted by Rus Sells

In reality his company is probably worth nothing because if he has a car wreck and is laid up in the hospital for months on end does the company still go on?

I don't mean this as an insult but its a hard reality we need to understand. To us our business is always worth something because our business and us are synonymous with each other.

Unless you've incorporated and have a clear cut plan that dictates what happens should you be laid up or even depart, and you have others in place to continue running the company and delivering services, as far as valuation you don't have squat really.

Rus,

This is an excellent point which a lot of us who own our own business never think about but should.

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ebizman

13 years ago

well I have a meeting with the investor next week.. I think I'm going to turn down the funding, because it might end up being a big headache with a "silent partner".

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Claude Whitacre

13 years ago

Originally Posted by ebizman

well I have a meeting with the investor next week.. I think I'm going to turn down the funding, because it might end up being a big headache with a "silent partner".

First: I see you actually came back, so I applaud that.

I think you are making the right decision.

But that isn't going to stop us debating what you should do! No Siree!

And by the way, no partner is "silent" if they think they are losing money.

There! See how I kept going?

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daddykool

13 years ago

Originally Posted by ebizman

Yes, I have a silent investor who I've been getting to know for some months now, and we've been talking about him potentially investing $65,000 in growing my offline business -this would be a HUGE opportunity, because I can make $50k+ per month with that type of funding to setup a sales team, leads, small office space..

The only downside would he would want 50% ownership in the company..

I've made some decent money in offline now and could continue to grow slow... or get funding.

:confused:

he is giving you a multiple of 5 when you should be giving him a multiple of 1 of the P.A turnover... try 10% ownership, 40% return

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Seantrepreneur

13 years ago

The 65k would only make you a puppet. The whole reason people get into the internet business is to be their own boss.

Jrampage said it right. What was the reason you got into business for yourself int he first place? Taking on an investor is going to give you someone to answer to and basically work for. Silent or not, he is going to want to see his money working for him.

That's the great part of being able to be an investor. You get to a point where you can dish out money, sit back and hope it provides a return. Look at good ole Mitt Romney for example.

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Adrian Browning

Banned 13 years ago

[DELETED]

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RedShifted

13 years ago

Originally Posted by Adrian Browning

You've received a sh#t load of terrible advice, so I'll throw you some knowledge...

I love how you said this right before you proceeded to give him a "shit load of terrible advice". Classic.

Originally Posted by Adrian Browning

Are you scared to use other peoples money to make yourself richer?

$65,000 is not a lot of money. You have to be F#&king kidding me. Also, this isn't shark tank, this is WF.

Originally Posted by Adrian Browning

If so, then you need to get the F out of this game: because you will forever be a pauper! - But, if not... then... you need to stop thinking with your emotions and 'use your head'.

Let's be 100% serious here... who really b#tches, moans and has sissy fits over how much of their company they give away to investors? Who cares if their investor gets the lion's share of the profits? Who in the blue hell gives a damn?

Where the HELL did he "bitch, moan and sissy fit"? The guy made a pretty simple thread. Reread his OP. Maybe he should stab the investor in the face, steal his money, and go to a rodeo?

Originally Posted by Adrian Browning

Venture capitalists are there to basically get their hands on all they can get... and walk away with as much money as possible... because you're the small fish, and they're the sharks...

BS. Some venture capitalists are dumb as... some people on WF.
And seriously, you're basically saying their job is to make money. Do you REALLY THINK this advice is better than what was already said in this thread?

GMAFB.

Originally Posted by Adrian Browning

Don't get caught up in womanly emotions when you know that the only reason you ever started a business was to make 'more money'... So if someone wants to take 50% of your company and in return you are given an investment which you'll use to make 'MORE MONEY'... tell me what the problem is? isn't that what you wanted?

Sissies, women, emotions.. whats ironic is I only see 1 person in this thread really getting emotional.

Originally Posted by Adrian Browning

I have bought pieces of countless firms, both public and private... and, I tell you now... If ANYONE I decide to invest in turned around and told me that "they don't feel right" giving me 50% of their company - I'd extend my right arm, and show them my middle finger...

Yeh OK. Like anyone believes that garbage. It depends on the business. Even the smartest investors realize this.

Originally Posted by Adrian Browning

Do I really want to work with an emotional mess who isn't even getting the full potential out of their own business? Do I really want to work with an indecisive wreck, who'd probably flake out on me during the third month and leave me out of pocket?

Question? Do you run your own business? I hate to break it to you. You're already working with a .................................................. ........ /\/\/\

Originally Posted by Adrian Browning

Because deep down, I'd know that they aren't made of sterner stuff... They don't yet value MONEY as much as they need to... They let their emotions override logic when making business decisions.. and THAT spells failure, ruin and something that I'd rather NOT be involved in!

So go ahead and BE A MAN! Take that money and use it as a foundation on which to build upon... Make damn well sure your investor gets his return (when he wants it)

Take no notice of all the skeptics and nay-sayers! YOU are in business to make 'MORE MONEY'! Never forget that

- Adrian

Sterner stuff. Men and cowboys. Too much testosterone. We get it. Great advice. :rolleyes:

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- maricelu 13 years ago
  
  Originally Posted by Adrian Browning
  
  No.. I run a whole bunch of businesses
  - Adrian
  
  for example?
  
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John Durham

13 years ago

Originally Posted by Adrian Browning

You've received a sh#t load of terrible advice, so I'll throw you some knowledge...

Are you scared to use other peoples money to make yourself richer?

If so, then you need to get the F out of this game: because you will forever be a pauper! - But, if not... then... you need to stop thinking with your emotions and 'use your head'.

Let's be 100% serious here... who really b#tches, moans and has sissy fits over how much of their company they give away to investors? Who cares if their investor gets the lion's share of the profits? Who in the blue hell gives a damn?

Venture capitalists are there to basically get their hands on all they can get... and walk away with as much money as possible... because you're the small fish, and they're the sharks...

BUT, the silver lining can be found in the mere fact that - you make more money with them than without them... Simple! and I'm tired of telling people this..

Don't get caught up in womanly emotions when you know that the only reason you ever started a business was to make 'more money'... So if someone wants to take 50% of your company and in return you are given an investment which you'll use to make 'MORE MONEY'... tell me what the problem is? isn't that what you wanted?

I have bought pieces of countless firms, both public and private... and, I tell you now... If ANYONE I decide to invest in turned around and told me that "they don't feel right" giving me 50% of their company - I'd extend my right arm, and show them my middle finger...

Do I really want to work with an emotional mess who isn't even getting the full potential out of their own business? Do I really want to work with an indecisive wreck, who'd probably flake out on me during the third month and leave me out of pocket?

NO!!!

Because deep down, I'd know that they aren't made of sterner stuff... They don't yet value MONEY as much as they need to... They let their emotions override logic when making business decisions.. and THAT spells failure, ruin and something that I'd rather NOT be involved in!

So go ahead and BE A MAN! Take that money and use it as a foundation on which to build upon... Make damn well sure your investor gets his return (when he wants it)

Take no notice of all the skeptics and nay-sayers! YOU are in business to make 'MORE MONEY'! Never forget that

- Adrian

Dammit Adrian, for once I stand corrected. You are right!

This makes alot of sense. Im not too prideful to be corrected even by a donkey's behind if they are right and Im wrong!

Epiphany time!

I have alot of talent and alot of people have alot of money that could push it forward alot faster.

My friends may not respect me allowing my self to be corrected, but Im no fool, and my pride isnt worth as much as gaining wisdom, wherever it comes from. You are right.

Originally Posted by Adrian Browning

If we are talking from a business point of view, then your business has to be worth nothing if 65K is the maximum someone is willing to put behind you... Not that there is anything wrong with that, because we all begin from somewhere..

- Adrian

It would take 150k just to run a fifty person call center for a month, but the returns can be 5 times that or more...however it would take you 90 days to even get that size of an operation in its groove, so no, 65k is not much to start anything significant on a fast track.Although one COULD shoe string it up to that point with less.

On that note:

The best way to blow it up fast is to go to a good sized rural town where there are no jobs, maybe a factory just got shut down or something,... Its harder to do in towns where telemarketers are spoiled and have their pick of job hopping opportunities. You have to be in a place where people are hungry for opportunity.

I have seen it with bowers company, he had a call center in nashville where opportunity was plenty that I ran, and it was rough growing...then he opened another in columbia Tn, where people are starved for opportunity, and it blew up over night and wild horses couldnt run people away from their job.

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Claude Whitacre

13 years ago

Originally Posted by John Durham

It would take 150k just to run a fifty person call center for a month, but the returns can be 5 times that or more...however it would take you 90 days to even get that size of an operation in its groove, so no, 65k is not much to start anything significant on a fast track.Although one COULD shoe string it up to that point with less.

On that note:

The best way to blow it up fast is to go to a good sized rural town where there are no jobs, maybe a factory just got shut down or something,... Its harder to do in towns where telemarketers are spoiled and have their pick of job hopping opportunities. You have to be in a place where people are hungry for opportunity.

I have seen it with bowers company, he had a call center in nashville where opportunity was plenty that I ran, and it was rough growing...then he opened another in columbia Tn, where people are starved for opportunity, and it blew up over night and wild horses couldnt run people away from their job.

John; I think you are comparing two different situations. You are a proven manager of huge call centers. You have seen large amounts created before. You know how it's done. You would be a much sounder investment.

For someone who is making a few thousand dollars a month, but has never had proven experience running a call center, I think it would be a huge gamble. It's not that he has no experience sellling, but he has no experience building a huge business. You know that's a different set of skills.

Of course, there is much I don't know about the OP's real experience. I can only speculate based on what I've read.

By the way..WAY useful information about choosing a depressed small town to grow in. See? That's something that someone who has built big before would know.

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kenmichaels

13 years ago

Originally Posted by Claude Whitacre

choosing a depressed small town to grow in. See? That's something that someone who has built big before would know.

uerrrmmmm

you sound like my attorneys... build in the economically depressed area
hire x ... build x % bigger... they will have to grandfather you in.

don't bother asking me how that turned out.

:confused:

those 3 similes, explain it all. ... in order

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Claude Whitacre

13 years ago

Originally Posted by kenmichaels

uerrrmmmm

you sound like my attorneys... build in the economically depressed area
hire x ... build x % bigger... they will have to grandfather you in.

don't bother asking me how that turned out.

:confused:

those 3 similes, explain it all. ... in order

Ken....Ken, Ken, Ken...KEN! I was telling John that, when he posted that, it was something only an experienced person would know.

You know something we don't. (a story, it sounds like)..could you tell us? Please oh please?

Seriously, this is an area I'm completely unfamiliar with.

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Rearden

13 years ago

Get a good lawyer familiar with this kind of work and have him read through the proposal and give you his legal advice.

Dad had a VC pitch him on investing in his company, but there were so many contingencies (IE -- if he keels over and dies the VC takes control) that it was a horrible business idea.

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Cash37

13 years ago

Is the biz worth more or less than $130k? Do you want a partner? Do you need the money or can you grow off profit?

Answer those questions and you have your answer.

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Tsnyder

13 years ago

Come on, guys... these deals are done every day by very smart people.

Unless the legitimate value of this business is more than $130K
the investor's offer is plenty good. The real question is what will
you do with the money that will enhance cash flow beyond what
you can do without the investment. Period. End of discussion.

If you can reasonably expect to triple or quadruple cash flow with
whatever you're going to do with the investment proceeds it's a flat
out no-brainer.

If the investor also has some degree of expertise specifically in the
industry you're in so much the better. Even if he doesn't know the ins
and outs of your specific industry he will still be a valuable resource
of business expertise unless he's a slacker who recently inherited the
money or he won the lottery.

The point is an investment, even one that requires relinquishing a
substantial portion of equity, is still a wise move if the money can be
used to significantly increase cash flow or if the partner brings needed
expertise to the table.

I'd rather have 50% of $400K than 100% of $100K. Yeah... I know... it's
possible that you could build it to that level eventually without the investment
but that mindset ignores lost opportunity cost. If you had the money sooner
you could put it to work in other investments that could well exceed the equity
exchanged for the initial investment. This, my friend, is how wealthy people
think. It's not always about equity...

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Cash37

13 years ago

Originally Posted by Tsnyder

Come on, guys... these deals are done every day by very smart people.

Unless the legitimate value of this business is more than $130K
the investor's offer is plenty good. The real question is what will
you do with the money that will enhance cash flow beyond what
you can do without the investment. Period. End of discussion.

If you can reasonably expect to triple or quadruple cash flow with
whatever you're going to do with the investment proceeds it's a flat
out no-brainer.

If the investor also has some degree of expertise specifically in the
industry you're in so much the better. Even if he doesn't know the ins
and outs of your specific industry he will still be a valuable resource
of business expertise unless he's a slacker who recently inherited the
money or he won the lottery.

The point is an investment, even one that requires relinquishing a
substantial portion of equity, is still a wise move if the money can be
used to significantly increase cash flow or if the partner brings needed
expertise to the table.

I'd rather have 50% of $400K than 100% of $100K. Yeah... I know... it's
possible that you could build it to that level eventually without the investment
but that mindset ignores lost opportunity cost. If you had the money sooner
you could put it to work in other investments that could well exceed the equity
exchanged for the initial investment. This, my friend, is how wealthy people
think. It's not always about equity...

The only thing that matters is the equity.

At 50% he no longer runs the company in his image, you realize this right?

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Tsnyder

13 years ago

Originally Posted by Cash37

The only thing that matters is the equity.

At 50% he no longer runs the company in his image, you realize this right?

Sorry... not true. Who says he can no longer run the company in
his own image... whatever the hell that means? Ever heard of contracts?
Ever heard the term managing partner? Ever heard of contractually
assigned duties and responsibilities. Do you think we just take the money,
give the equity and that's it? Is that how you do it?

Equity is not the only thing that matters... by a long shot.
If the guy needs help and his business is valued at, or below,
$130,000 how much equity do you think the investor should receive
in exchange for paying 50% of the value of the company?

You keep worrying about equity... I'l keep focusing on cash flow and net profits.

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Cash37

13 years ago

Originally Posted by Tsnyder

Sorry... not true. Who says he can no longer run the company in
his own image... whatever the hell that means? Ever heard of contracts?
Ever heard the term managing partner? Ever heard of contractually
assigned duties and responsibilities. Do you think we just take the money,
give the equity and that's it? Is that how you do it?

Equity is not the only thing that matters... by a long shot.
If the guy needs help and his business is valued at, or below,
$130,000 how much equity do you think the investor should receive
in exchange for paying 50% of the value of the company?

You keep worrying about equity... I'l keep focusing on cash flow and net profits.

If someone is coming in at 50% they sure as hell aren't doing it to be a silent partner. 50% equity is a decision making stake. Period.

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Tsnyder 13 years ago

Originally Posted by Cash37

If someone is coming in at 50% they sure as hell aren't doing it to be a silent partner. 50% equity is a decision making stake. Period.

That may be true but the OP specifically said the guy wants to
be a silent partner. So... I refer you, once again, to the question
about contracts. You're just guessing... I'm telling you how it can
be in the real world from personal experience. I've done more than
a few deals as both investor and founder where I gave or got 50%
equity. If the managing partner has a great concept and knows what
he's doing but is short on the amount of capital necessary to maximize
results only a fool would walk away after proper due diligence... from
either end of the deal.
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puckerhuddle

13 years ago

Exit strategy. If you know what you want to achieve and when you want to cash out, this is a great point to start your planning. If a partner can help with you achieving this goal, it is a good thing regardless of the % you give up.

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Rus Sells

13 years ago

Debating this whole thing is really pointless at this juncture. I'm willing to bet my cat that the business isn't worth anything let alone double the investment proposal.

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iAmNameLess

13 years ago

Originally Posted by Rus Sells

Debating this whole thing is really pointless at this juncture. I'm willing to bet my cat that the business isn't worth anything let alone double the investment proposal.

The dude is offering $65,000 for 50% of a company that could dissolve in a month. or 65k for a business worth nothing. I think it's kind of crazy to not take the offer.

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Rus Sells

13 years ago

Exactly why the offer isn't legit to begin with.

Originally Posted by iAmNameLess

The dude is offering $65,000 for 50% of a company that could dissolve in a month. or 65k for a business worth nothing. I think it's kind of crazy to not take the offer.

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John Durham

13 years ago

Originally Posted by Rus Sells

Exactly why the offer isn't legit to begin with.

Interesting thread, but I knew it was bs anyway, because he said the same thing last year. dont know what angle he is coming from... maybe he wants us to all beg him for a wso on how to land an investor.

Not me. If I get to where I want an investor I know how to go balls to the wall and pursue one from every angle. Teetering on the idea a bit actually.

Here I will tell you how:

A: Advertise your ass of
B: Send them to a sales page explaining the outline of your idea
C: Charge anyone who wants to see your detailed prospectus 500 bucks, to weed out fishers.

($500 is less than the cost of a plane ticket that they would have to pay and lodging for you to come present, if they are serious they will do it. If they dont, they are just trying to see your plan).

D: Keep doing it till you get the money even if it takes months.

If all that fails then your plan sucks, or the way you are presenting it sucks.

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Tsnyder

13 years ago

Originally Posted by John Durham

Interesting thread, but I knew it was bs anyway, because he said the same thing last year. dont know what angle he is coming from... maybe he wants us to all beg him for a wso on how to land an investor.

Not me. If I get to where I want an investor I know how to go balls to the wall and pursue one from every angle. Teetering on the idea a bit actually.

Here I will tell you how:

A: Advertise your ass of
B: Send them to a sales page explaining the outline of your idea
C: Charge anyone who wants to see your detailed prospectus 500 bucks, to weed out fishers.

($500 is less than the cost of a plane ticket that they would have to pay and lodging for you to come present, if they are serious they will do it. If they dont, they are just trying to see your plan).

D: Keep doing it till you get the money even if it takes months.

If all that fails then your plan sucks, or the way you are presenting it sucks.

Man... that's the long drawn out difficult way... just pick up the
phone and make a few calls... someone will lead you to someone
who will lead you to someone who will do a deal!

Best sources... by far... bankers (VP and above) and CPAs... some
independent commercial lines insurance agents (they know all the
business players in the market)

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John Durham

13 years ago

Originally Posted by Tsnyder

Man... that's the long drawn out difficult way... just pick up the
phone and make a few calls... someone will lead you to someone
who will lead you to someone who will do a deal!

Best sources... by far... bankers (VP and above) and CPAs... some
independent commercial lines insurance agents (they know all the
business players in the market)

Outta Thanks but thanks!

Originally Posted by ebizman

John Durham I'm NOT here to sell any WSOs mr.

Yes I did not respond to your PMs last year to pay your "fee".

Doesnt need you need to think I'm selling a wso ha.

Not looking to bash... You said this same thing last year though then disappeared, you have to admit thats kinda weird.

As far as a "fee" - I dont sell services like this one, but if someone wants me to make them a sales presentation custom, I wont do it for free. In either event , when you ask a question in a thread, responding to the answers is appropriate.

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ebizman 13 years ago

Originally Posted by Rus Sells

Exactly why the offer isn't legit to begin with.

Rus.. this thread is very legit...

I'm making a consistent amount of money each month (not over $10k)...and if you read my comment I said I have a meeting with the investor next week. He hasn't even 100% committed yet, but he's very interested.
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RedShifted

13 years ago

@Adrian

My problem wasn't with the advice. If someone gave you the best advice in the world, while they were hitting you over the head with a bat, then set you on fire, do you think you'd take their advice? Regardless of how accurate it was?

I think its fine to give someone a good hard kick in the ass. Sean Oleary is a master at this. But ranting on about emotions and sissies and sharks ... when the OP was fairly neutral from his first post, seemed like complete overkill to me. All the man conveyed was a bit of indecisiveness, lets be real. You took that and somehow derived 10 thousand and 1 negative assumptions about his personality.

That would be like me, taking what you said, and ranting on for 3 pages about how I also think you're a homocidal ax murderer & baby killer. Then I proceed to give you good business advice.. . I don't know, call me crazy, maybe I'm too damn soft for this forum.

More importantly, this is only a $65,000 investment. Its not like the guy is traveling around the world pitching a 10 million dollar business to thousands of investors. So again, information may be spot on, but the way you tried to get that information in his brain, couldn't be any more miscalibrated imo.

-Red

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Eddie Spangler

13 years ago

Originally Posted by RedShifted

@Adrian

That would be like me, taking what you said, and ranting on for 3 pages about how I also think you're a homocidal ax murderer & baby killer. Then I proceed to give you good business advice.. after you are 90% dead. I don't know, call me crazy, maybe I'm too damn soft for this forum.

.

Voted worst analogy in Offline Forum history:confused:

:confused:

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John Durham

13 years ago

Originally Posted by RedShifted

@Adrian

My problem wasn't with the advice. If someone gave you the best advice in the world, while they were hitting you over the head with a bat, then set you on fire, do you think you'd take their advice? Regardless of how accurate it was?

You have to separate the issues to gain value from the advice. You may throw the bath water out, but not the baby with it.

The thing that got me that Adrian said was this "Are you scared to make a million dollars with someone elses money?"

Hell no, I would make them rich. Im not scared.

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kenmichaels 13 years ago

Originally Posted by John Durham

You have to sparate the issues to value from the advice. You may throw the bath water out, but not the baby with it.

fair enough.

Then i will just say this, and i was planning on staying out if this thread.

Silent investors usually DON'T invest @ a 65k mark.

It is usually 25k increments, until you reach 100k
then it doubles to 100k increments.

after 100 it again doubles..

So, 65k MIGHT POSSIBLY mean , family, friend, acquaintance..

if so , that in itself throws most normal advice out

Or.. it means .. complete BS...

Or... a unqualified investor..

Or ... inexperienced investor.

now lets be brutally honest for a sec.

If its a traditional silent investor... or at least playing by the traditional rules

there is no penalty for loss of investment.

ie, thanks for the 65k.. .. ooops i fold.

So ... uh .. " free money "

more then likely if its an inexperienced investor they will ask for 50%
but it means nothing if you fold.

the smart ones ... the experienced ones, will only invest in increments.

the friends, family and acquaintances...

well that is a whole diffrent issue...
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untappedrep

13 years ago

This would be a subject to talk to a professional about. I am not a professional in the world of investing.

What I would do:

Tell him to hit the road. Keep building your business slow and strong like you have been.

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John Durham

13 years ago

Yeah Ken...

You are right. If you have no business already I would personally ask for 50k per month for a number of months to start, and 20k of it would be my salary to make sure I could focus 100%, because I am a hell of an MVP if Im all there.

But in the case of my friend...

He had a small factory with a small handful of less than 10 employees... and he made a prototype product, introduced it to walmart buyers, and walmart invested in him and gave him a check for 5 million dollars to produce 3 million units within 6 months...and he took off on a hiring and growth spree, and did it... never looked back until he had made over 300 million dollars.

Ps. He started it with only 26k he had saved up...

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sandalwood 13 years ago

Well, the advice certainly has been all over the board. I don't know the investor but I'd let him invest his 65K in my business. I am involved in several opportunities right here in the desert that are an absolute almost. A "mere" 65K can blossom them into a huge suajaro in no time.

After all, this is still the land of opportunity.

Tom
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ebizman

13 years ago

John Durham I'm NOT here to sell any WSOs mr.

Yes I did not respond to your PMs last year to pay your "fee".

Doesnt need you need to think I'm selling a wso ha.

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ebizman

13 years ago

Adrian Browning - please STOP right here, you're not offering any valuable feedback here. I feel like if anything you are bashing me!

I just made a quick post on here geezus!

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ebizman

13 years ago

RedShifted...thank you for being normal and seeing my side!

seems like some people on here are just looking to bash someone up.

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Eddie Spangler

13 years ago

The odds say nothing happens here, just a bunch of fluff and puff.
But if this guy is really wanting to give you 65k for half your "business"...

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ScottGrey

13 years ago

How has nobody suggested just getting a loan? If you need capital to scale your growth you can borrow against future earnings. Your cash flow will decrease until you pay off the installments, but if you truly believe you can scale, then scale.

Whoever offered the golden nugget about Facebook, Peter Theil's initial $500k investment bought him 7%. That left the FB team with plenty of equity in order to raise additional rounds, have an IPO, etc. If Zuck had sold 50% at that point he would be worth a lot less.

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John Durham

13 years ago

Businesses dont work out sometimes... It happens. There are so many variables its scary. Im just speaking from my own experience. In smaller towns people appreciate opportunity more because they arent spoiled with it, and the swinging door doesnt swing so much. In my own experience, they are more dedicated and appreciative of opportunity.

In larger towns telemarketers have their pick of jobs and they do alot of job hopping , it takes longer to build a core team, and they dont care as much if they impress you or work hard because there is another room two blocks down the street.

In a small town where the average pay is 8 bucks per hour, you can offer twelve and wild horses wont run people away from their job...they will do everything they can to keep it.

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