TonyP
10-20-2012, 03:23 AM
I need some help in structuring the split on a new business.
I'm new to all of this but from what I can gather from reading through the archives I have an idea of how to do this but I would like you guys opinion on this.
The business will be a new franchise which I will be running. The franchise model allows for a semi absentee ownership but I'm realistic in regards that I'll be putting in alot of hours in learning the business. As the business normalizes I am expecting to put in about 20 hours a week. The total investment is projected to be about $200,000. My projections are and these are conservative:
1st year - break even to negative $20,000
2nd year - $30,000 profit
3rd year - $60,000 profit
4th year - $70,000 profit
I will be taking out a small business loan of about 65% or $130,000 which I will be personally guaranteeing. As for the remaining balance of $70,000 I am looking at bringing in a silent partner.
My partner which I have invested with before in the pass (on real estate deals) is only looking for cash flow. He does not want to be involved in the business. If he was to invest $70,000, would a 50/50 split of the profit until he gets his initial investment back and then a 80/20 split afterwards where he gets the 20% be good? I am also looking at having an opportunity to buy him out after 5 years. Does this seem to be right? Or am I giving up too much or too little? I want to be fair. I have not factor in paying myself but I don't know if I should. And if I do how much should I pay myself?
Also what should his equity share be? I'm assuming if he's investing $70,000 that's 35% of the total investment so should he get 35% equity or should he get 50% because he's investing all the equity up front? Can the share be scalable as well?
Sorry for all the questions but all this is new to me. Thank you for being patent and answering my questions.
I'm new to all of this but from what I can gather from reading through the archives I have an idea of how to do this but I would like you guys opinion on this.
The business will be a new franchise which I will be running. The franchise model allows for a semi absentee ownership but I'm realistic in regards that I'll be putting in alot of hours in learning the business. As the business normalizes I am expecting to put in about 20 hours a week. The total investment is projected to be about $200,000. My projections are and these are conservative:
1st year - break even to negative $20,000
2nd year - $30,000 profit
3rd year - $60,000 profit
4th year - $70,000 profit
I will be taking out a small business loan of about 65% or $130,000 which I will be personally guaranteeing. As for the remaining balance of $70,000 I am looking at bringing in a silent partner.
My partner which I have invested with before in the pass (on real estate deals) is only looking for cash flow. He does not want to be involved in the business. If he was to invest $70,000, would a 50/50 split of the profit until he gets his initial investment back and then a 80/20 split afterwards where he gets the 20% be good? I am also looking at having an opportunity to buy him out after 5 years. Does this seem to be right? Or am I giving up too much or too little? I want to be fair. I have not factor in paying myself but I don't know if I should. And if I do how much should I pay myself?
Also what should his equity share be? I'm assuming if he's investing $70,000 that's 35% of the total investment so should he get 35% equity or should he get 50% because he's investing all the equity up front? Can the share be scalable as well?
Sorry for all the questions but all this is new to me. Thank you for being patent and answering my questions.