Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 03-04-2011, 01:47 PM
 
Location: Up North
3,426 posts, read 8,885,653 times
Reputation: 3126

Advertisements

I have had a small business idea for a while now. It involves my passions and I'm very excited for the day I can put my business idea to good use.

To make a long story short, I met someone today by chance who told me would be willing to invest $30,000 into my business idea. He owns a small business of his own.

I'm so excited but, I don't know where to start. I don't want to get ****ed over and I don't want to **** my potential investor over. What are the rules? Can anyone reccomend some literature on dealing with investors?

I don't know the first thing about dealing with investors and I'm meeting with him later today.

How much of a cut does he get from profits? How long do I have to pay him back? Do I need a lawyer to write out a plan between us?

I know squat about this and appreciate all suggestions, thank you!
Reply With Quote Quick reply to this message

 
Old 03-04-2011, 02:44 PM
 
1,475 posts, read 2,549,911 times
Reputation: 670
Quote:
Originally Posted by Pear Martini View Post
Do I need a lawyer to write out a plan between us?
You will need a lawyer and he will also need a lawyer.

More importantly than that is, you both create whatever deal you want. That's the beauty of living in a free (dom) country (well freedom for the moment).

You sit down and come up with a deal that benefits both of you. There will be some compromise on both sides. But that's OK as long as you both feel good about the deal, you're good to go.

If anything makes you feel uneasy, say so! Then work it out.
Reply With Quote Quick reply to this message
 
Old 03-04-2011, 03:13 PM
 
11,550 posts, read 53,014,054 times
Reputation: 16329
You can structure a deal any way that you agree to do so, but having a lawyer review any sort of investor or partnership agreement is a good idea.

What you want to assure is that your business idea has enough capital to be able to reach some level of fruition while your investor/partner has a return on their investment capital. There has to be some sort of quid-pro-pro for each to be satisfied with the arrangement, or it will quickly deteriorate to a problem for both of you. You both need to know in advance what is expected of the other for performance and potential income, what your limitations are, and who is going to do what for the business ... and in what time frame.

The problem with your situation, however, is that the cost of legal advice for a business investment of only $3,000 is going to be prohibitive. It wouldn't be out of the realm of reality to spend several hours on this in legal time ... at what? $250-350 per hour for each of you, if not more? That's an unreasonable expense burden for a $3,000 business investment.

IMO, if it's only $3,000 that's keeping you from a successful business opportunity, you'd be far better off to earn and save up that money yourself or obtain it from a CC (or some other unsecured loan) and apply it to your business idea where you retain complete control and ownership of the business. Then all the risk and rewards are yours to capture.
Reply With Quote Quick reply to this message
 
Old 03-04-2011, 06:10 PM
 
Location: Up North
3,426 posts, read 8,885,653 times
Reputation: 3126
ooops. Did I type 3,000? I meant 30,000.

With my current credit, I could probably take a loan out, but I want to to this the smart way, not the desperate way or the dumb way.

I'm trying to learn as much as possible about owning a small business.

I'm already fluent in sales/marketing because I have done some of that type of work. I just need to learn about everything else.
Reply With Quote Quick reply to this message
 
Old 03-04-2011, 06:27 PM
 
1,475 posts, read 2,549,911 times
Reputation: 670
Quote:
Originally Posted by Pear Martini View Post
I'm already fluent in sales/marketing because I have done some of that type of work. I just need to learn about everything else.
You should learn to hire help for everything else, not learn it yourself. People need jobs. You'll also be able to focus on promoting the product.
Reply With Quote Quick reply to this message
 
Old 03-05-2011, 03:35 AM
 
11,550 posts, read 53,014,054 times
Reputation: 16329
Quote:
Originally Posted by Pear Martini View Post
ooops. Did I type 3,000? I meant 30,000.

With my current credit, I could probably take a loan out, but I want to to this the smart way, not the desperate way or the dumb way.

I'm trying to learn as much as possible about owning a small business.

I'm already fluent in sales/marketing because I have done some of that type of work. I just need to learn about everything else.
OK, you need $30,000 ...

If you've got the resources to get that money on your own, what advantage do you see to having a single private investor in your business?

Unless they're a benefactor, willing to loan you the money at less than market rates ... what you're bringing in to your business is a partner, whether you see it that way or structure a deal with them where they just get a percentage of the cash flow/profits or a fixed rate of return/repayment schedule.

So ask yourself: Do I really want a partner in my business?

A bank will maintain an arm's length transaction with you. They're in the business of lending money, and really want nothing but timely repayment with interest.

A private party will typically want to be involved to assure/maximize their ROI.

Or, maybe that investor is bringing something to your business besides capital that you need, too?
Reply With Quote Quick reply to this message
 
Old 03-05-2011, 10:39 AM
 
Location: Up North
3,426 posts, read 8,885,653 times
Reputation: 3126
Quote:
Originally Posted by Rich_CD View Post
You should learn to hire help for everything else, not learn it yourself. People need jobs. You'll also be able to focus on promoting the product.

Thats what I have been told and have beem learning through my research. I want to open a dog grooming place/upscale boarding. This has been my passion since I was a 4 year old. When I was in highschool, I didn't care about my grades because 1.. I was a moron and 2.. I wanted to be a dog groomer and knew I wouldn't need a degree for that.

I took a few years off of my passion because I fell into a different industry, but I'm back and I want to make it work.

I don't know if I should learn how to groom dogs and get a groomers liscese or just hire someone?
I know it would be cheaper to do it myself but hiring would give me time to focus on everything else.

My funds will be limited, I have very good credit for a person of my age. I can either take a year off on college, save $20,000-$25,000 or I can take out a loan from a bank ($20,000-$30,000) and pay it off through my dog business and through a few side jobs.

I have slept on it and I don't want to split profits with an investor, sounds like a messy situation.
Reply With Quote Quick reply to this message
 
Old 03-05-2011, 10:42 AM
 
Location: Up North
3,426 posts, read 8,885,653 times
Reputation: 3126
Quote:
Originally Posted by sunsprit View Post
OK, you need $30,000 ...

If you've got the resources to get that money on your own, what advantage do you see to having a single private investor in your business?

Unless they're a benefactor, willing to loan you the money at less than market rates ... what you're bringing in to your business is a partner, whether you see it that way or structure a deal with them where they just get a percentage of the cash flow/profits or a fixed rate of return/repayment schedule.

So ask yourself: Do I really want a partner in my business?

A bank will maintain an arm's length transaction with you. They're in the business of lending money, and really want nothing but timely repayment with interest.

A private party will typically want to be involved to assure/maximize their ROI.

Or, maybe that investor is bringing something to your business besides capital that you need, too?
Thanks, these are all great points. I need to really think about things. I think I would prefer using a bank, unless I could find an investor who was also a dog groomer.

So, if I need $30,000 to open this place and run it, I just realised, how will I eat? Can I expet profits immediatly? I'm not so sure, do I take out another loan for living expenses? Do I do some work on the side?
Reply With Quote Quick reply to this message
 
Old 03-05-2011, 11:17 AM
 
1,475 posts, read 2,549,911 times
Reputation: 670
Quote:
Originally Posted by Pear Martini View Post
I want to open a dog grooming place/upscale boarding.... I wanted to be a dog groomer and knew I wouldn't need a degree for that.
I'm a bit confused. Do you want to be a business owner or a dog groomer?

You can be a dog groomer by owning a dog grooming business or finding a job. You can't be a business owner by finding a job.

You should really decide what you want to be first and foremost.
Reply With Quote Quick reply to this message
 
Old 03-05-2011, 11:29 AM
 
Location: Up North
3,426 posts, read 8,885,653 times
Reputation: 3126
I'm sorry, I didn't explain myself well. I want to own the business. I love taking care of dogs, but I want to be the owner of the business.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics

All times are GMT -6.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top