Forums: Discussions for entrepreneurs and small business.

Hello forum,

I`m running a new company aimed at entrepreneurship. We are at the eve
of launch, which will include a number of remarkable products and
services.

Amongst others, an on demand software system, that integrates CRM,
ERP, Fulfillment and Support. In other words, one system for your entire
organization.

Because of the potential of the business, I have financed all development
myself. We`ve been successfully bootstrapping until now. (Sales of about
$150k and highly profitable). But after all investments in our
product line-up, working capital is at a low point. Which you can imagine.

Enter investor/entrepreneur, who offers me this:

- Loan of $100k,=

In return for:

- 40% of shares
- 50% say in management
- And after repayment of the loan the first $750k in free profits will be
100% for myself.

I`m thinking, this is not a deal to be done, but I am considering it,
because I want to asure the company of a successful launch.

What do you think? Is this deal fair?

You definately want to share this with counsel. In my opinion i would say No, it does not look good. Can you try a loan instead?

-------------------------

Our Goal Is Your Success!
Founder Girls with Goals

If he receives 40% of the company for $100,000 -that means the valuation of the company is $250K

What does it mean to have 50% say in the management - that you both have to agree on everything?

The company has to repay his $100,000

And you are condsidering this -why.

Simply put - stay away from this deal.

If you have revenue of $150K - you can find a much more attractive way to bring capital into your company - using either debt or equity.

If you`d like to discuss options for your specific situation, contact me privately

Robert Johnson

 

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Danny, I was going to chime in - However, Robert summed it up very nicely. I don`t know Robert, but if it was me, I`d at least talk to him and hear what he has to say. Keep us posted.

R@

-------------------------

Richard Arnold · Key Concept Writers · Business Communication: The "Key" To Success· Law of Attraction Blog · Life Ain`t Brain Surgery Blog

Thanks for the quick feedback!

I was leaning towards these sentiments myself, as I mentioned in the
post, but I am tempted by the improved liquidity, which in turn should
ensure a foothold for the company in several markets, which obviously in
the greater scheme of things can be considered extremely valuable for
me to achieve.

However your feedback does set me straight again. I would like to discuss
other options with you Robert. Thanks for that offer.

In this light, it might be of importance to explain a bit more about how
we`re organized. You could compare us to an organization like described
here in Business 2.0:

http://money.cnn.com/magazines/business2/business2_archive/
2006/07/01/8380230/index.htm

This is extremely great for us in terms of costs and organizational battle
strength, but has brought a lot of difficulty in dealing with institutions
like banks.

You probably know how that goes, when you don`t really need the money,
you`re not really motivated to explain again and again to every single
person, how it`s possible to run a starting company and still have
operations on several continents.

But this seems to be the right moment, to get this in place. Although I
would probably prefer an investor, instead of a bank loan.

Principal investments in the organization have been made, so now it`s a
matter of going to market and scaling up.

Would our unusual structure hurt us in this process? And would you
change your advice because of it?

I tend to agree with Robert`s comments, but also provide the following caution:

Unless you absolutely trust this investor implicitly, and have shared and agreed upon management styles, short and long-term business plans, and have developed some sort of exit strategy for the investor, I would strongly discourage you from giving centralized management rights to this individual.  View the proposed relationship as a marriage!


-------------------------


Pepper Law Group, LLC
21 E. High Street, Suite D
Somerville, NJ 08876
informationlaw.com
Now available on DVD!
The Legal Considerations of Starting an Online Business