Jamie, you’re all over the place as far as structuring an investment in your design firm is concerned. First, of all Mark (the other Mark ?) made a valid point recommending to issue debt over equity to investors. Especially in times of economic uncertainty, debt is quite appealing in the eyes of investors because it (i) limits their risk and (ii) yields a guaranteed minimum financial return regardless of the company’s performance. Since I’m assuming that neither you nor the company has any collateral to secure these notes, you might want to look into issuing convertible debt or detached warrants along with your notes. This is often called a deal sweetener as it gives investors an opportunity to either convert their loan into equity at a certain point in time or buy shares at a certain price per share.
When it comes to putting a value on your company, do a simple discounted cash flow analysis instead of guessing. This is a rather simple method of valuing a company as it considers 2-3 years of historical free cash flow and 2-3 years of projected free cash flow. With other words the free cash, after taxes, that your company generates every year. This number is then linked to a certain discount factor based on industry and development stage, and reflects a very rough valuation of your business.
Another route to go is applying multiples to your annual earnings.
In any event, Mark (yes, again the other Mark) is spot on recommending that you be extremely careful. Corporate finance is no playing ground for the inexperienced and you could well loose your business or get sued by investors if you’re wrong. You may also get in trouble with regulators if your endeavors to get in touch with investors can be seen as a violation of state and federal securities laws. So, be extremely careful and invest a couple of bucks in having someone advise you on these matters.
I hope this helps.
Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.