Forums: Discussions for entrepreneurs and small business.

I am working on opening a cafe in my hometown. The total startup would be around $125,000 if I purchase the building outright. With a three-year contract for deed, it would be $48,000 up front. This covers permits, construction (minimal), equipment, furniture, supplies, insurance, utilities and payroll. The cash flow projections never go negative monthly and the business in turning a profit in year two. My credit score varies between 690 and 705. I have no capital to put in myself. Would it be better to focus on 4 small investors of $12,000 each with a ROI of $18,000 over five years, or find an angel investor for the $125,000? (I have a complete, conservative business plan with all assumptions, break-even, revenue and labor worksheets and contingency plans for a poor market.) What advice can you give me?

Annielives,

There may be a more optimum capital strategy than either of those you mention.

For example,  you might be able to get a loan to purchase the real estate. 

Have you identified 4 people who will put in $12,000?

Are they OK with the return you are projecting?

I would need more information to give any specific input regarding the optimum capital strategy.  When seeking outside capital, your language is very important - so I advise you to omit the reference to a "conservative" business plan.

If you want to discuss your specific situation, feel free to contact me directly

Robert j

PS: I see you're from Jerseyville. I'm from Chatham (just south of Springfield)

Why would you buy or build to start a cafe? Your first investor is the real estate development company that builds commercial buildings. The ROI for that investor is from the rent you pay. Not only that, but you're in a better position by renting because you can relocate your business if necessary.