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- Oct 24, 2011
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Dude you are crazy. You need the $50k or the business will never make the $1.2m. There is basically no reward to the investor. He was valuing your business at $170k at that point. He is buying a portion of your business. He is investing $50k in hopes to make $400k (based on $1.2m) or more. Did you offer to buy him out in 5 years at $400k?
Would you do that if it were the other way around?
I'm going to start a business and I need $10k. For the $10k, I'll give you 20% of the profits for the first 5 years. Then after that, when the business really takes off, I'll give you $15k and we can part ways. Does that sound like a deal to you?
I appreciate your input. I would have taken it if he would have negotiated his terms some. He wasn't willing for a buy out or a lower percentage of ownership. That's why I mentioned to OP that if the guy is willing to be flexible he should consider it.
And I know it's limited information just from my one post but let me clarify so I'm not considered insane. He was asking for 35% share of all profit for the life of the busines. So I understand how you did your math FOR ONE YEAR. And if that's all he wanted I would have had a pen in his hand faster than he could blink.
If it were the other way around I would have asked for 5% for the life of the business or 30% for 4 years with a 1% remainder of the business.
If I can make that much money myself and it just puts me starting that particular business up at a later date then I'm going to take it vs his terms. If you took his terms but had the ability to produce that money yourself, then you're crazy. I value future money just as highly if not higher than present money. Most people can't see past the green today for the potential profit tomorrow.
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