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nationv3
08-22-2013, 05:07 PM
First time post. Recently opened up a Pediatric Physical Therapy Clinic. Consisting of myself(not a physical therapist), and two pediatric physical therapist. We are all equal partners. Have been in talks with a capital investor. The clinics projected valuation is 1 Million dollars. Investor understands our strong need for capital. His initial offer cutting through details is $200,000 for %52 of company essentially giving him control of business. This is something we do not want to do. We feel this is a high ball offer to see what our response is. Would like some advice on how to approach this scenario. Investor will have nothing to do with clinic as far as work and clinic has been open 4 weeks. We feel with this offer we essentially will be working as employees.

Thank you

Freelancier
08-22-2013, 05:33 PM
Actually, more like an employee who gets dividends, but no real control over business decisions.

Know that your $1M valuation is only accurate if have an actual buyer ready to pay that price... otherwise, it's just a number with no real meaning.

How much capital do you need and what are you willing to give for that capital? If you need a smaller amount, you might want to look for an "angel" or family members to put up money for a smaller percentage.

Paul
08-22-2013, 06:47 PM
First time post. Recently opened up a Pediatric Physical Therapy Clinic. Consisting of myself(not a physical therapist), and two pediatric physical therapist. We are all equal partners. Have been in talks with a capital investor. The clinics projected valuation is 1 Million dollars. Investor understands our strong need for capital. His initial offer cutting through details is $200,000 for %52 of company essentially giving him control of business. This is something we do not want to do. We feel this is a high ball offer to see what our response is. Would like some advice on how to approach this scenario. Investor will have nothing to do with clinic as far as work and clinic has been open 4 weeks. We feel with this offer we essentially will be working as employees.

Thank you

Depending on what you and your partners have invested his offer may be fair.

He’s put a $ 400,000 valuation on a 4 week old company. How does his $ 200,000 compare to your partners investment?

If you are happy with the percentage, but not the control just tell him that. It may or may not be important to him. If it is then you can negotiate some of the terms of “control”. He may only care that YOU don’t have control, not that he wants to control. Most investors want to protect their investment. He may mostly want to direct and monitor the use of proceeds.

It’s not that you will be employees; you already are of the business. It’s the other “control” issues that both you and he need to be concerned with. Can he sell without your permission, can he dilute you by bringing in other investors, and can he fire anyone. The answers don’t have to be yes.

There's more than one way to skin a cat as they say.

Fulcrum
08-22-2013, 06:52 PM
A couple of options may be to counter him at 49% or leave it at 52% but both you and your partner remain in control of the board of directors.

nexxterra
08-22-2013, 08:51 PM
The licensing of the business can not be done by the investor, so he should not have controlling interest. The therapists with licenses on the line should NOT place themselves in a position of listening to someone that does not have his livelihood on the line.

Paul
08-22-2013, 11:12 PM
The licensing of the business can not be done by the investor, so he should not have controlling interest. The therapists with licenses on the line should NOT place themselves in a position of listening to someone that does not have his livelihood on the line.

But, without his investment they may not continue to operate. Regardless of licensing issues the investor, at this time, has the upper hand. The investor has his money on the line. i think the therapists may have their livlihood on the line without an investment.

Harold Mansfield
08-23-2013, 11:24 AM
An investor is always going to want control. Counter with 49%, or 50%, but for more money. Don't give up control of a promising medical services business and practice for a few grand that you can't even pocket because you need it for operational expenses.

You'd basically be giving up control just to break even. I don't like that deal.

Paul
08-23-2013, 06:51 PM
Finding a willing investor today, for any amount, is not easy. They should not dismiss this investor, unless of course they have another lined up.

It’s not likely the investor really cares about “control” but rather wants to be able to protect his investment in the event of mismanagement. They can sort that out in many different ways.

The $ 200,000 may be the key to a long successful future for all involved.

In my opinion they should do whatever is necessary to accommodate the investor. Finding an investor at that level for this type of business is almost a miracle. This is not a potential Microsoft where the upside potential justifies the risk. It probably has a limited upside potential with total risk.

I don’t know how critical a capital infusion is at this point. I don’t know if the business is in jeopardy without an investment. It’s a four week old business and I don’t know anything about its revenue or profits. I don’t know what their other options are. But you can’t just dismiss a serious investor because he wants to protect his investment.

Why would he invest without some control? That would be foolish on his part.

Alisha
09-10-2013, 03:47 AM
An investor is always going to want control. Counter with 49%, or 50%, but for more money. Don't give up control of a promising medical services business and practice for a few grand that you can't even pocket because you need it for operational expenses.

You'd basically be giving up control just to break even. I don't like that deal.
@Harold Mansfield, It's true a heavy investor charged more power to control this business. so, it's depend on you what's you want to allow him to do in investment case in future?

Osprey
09-30-2013, 08:28 PM
Angel investors are typically between 15 to 25% tops. This guy is a clown. No true investor is going to come in and try to control your business. You are in the business to be your own boss and make money. Do not even come close to this guy - find another angel investor. If this guy is willing to invest you, then others are too.

Do not go near this guy/gal - why would you ever go into business for yourself, only to give 52% of it to someone because they have money. This is your dream, your work, your sweat blood and tears - there are much better options out there...especially now that capital is loosening up and Angels are starting to come back in the game.

:o good luck

Osprey
09-30-2013, 08:33 PM
Finding a willing investor today, for any amount, is not easy. They should not dismiss this investor, unless of course they have another lined up.

It’s not likely the investor really cares about “control” but rather wants to be able to protect his investment in the event of mismanagement. They can sort that out in many different ways.

The $ 200,000 may be the key to a long successful future for all involved.

In my opinion they should do whatever is necessary to accommodate the investor. Finding an investor at that level for this type of business is almost a miracle. This is not a potential Microsoft where the upside potential justifies the risk. It probably has a limited upside potential with total risk.

I don’t know how critical a capital infusion is at this point. I don’t know if the business is in jeopardy without an investment. It’s a four week old business and I don’t know anything about its revenue or profits. I don’t know what their other options are. But you can’t just dismiss a serious investor because he wants to protect his investment.

Why would he invest without some control? That would be foolish on his part.

I would disagree - if he didn't want control, but rather protection, then he would ask for collateral. Why would a true Angel Investor ever want to be in control - there are so many other ways to secure your money, taking majority interest is questionable.

They could do a sliding time line maybe? They could Decrease his interest as they make more and more payments back to him. Put his controlling interest can never be majority, and always has to be silent in my opinion.

LordVito9
01-31-2014, 01:49 AM
is there any other investors at all you can approach? to give you leverage in the negotiation? any alternative?

Just a novices question