Absent Investor Percentage ???

**doc1976** · 01-18-2008 12:57 AM

Hello everyone, here's my situation. I am fixing to open up a small business in the hair industry. Both my wife and I are Hair stylist, and have decided to open our own shop. However, we have gotten a few clients . and family members that would like to become the investors. They see the potential and I can understand them. Nevertheless, I am not certain on how to arrange this situation as far as the percentage goes. My investor has proposed to me the loan for 100,000 , and 50/50 on the profits. Does this sound like a reasonable offer ? I tend to feel its to much for them since they will not be doing any work. What is the norm. % for blind investors? The loan will most likely get paid off in 3 years, should the % change after that period of time?
Please any information would be greatly appreciated...

**DaimyoTaka** · 01-18-2008 09:57 AM

i would set a percentage for the duration of the loan, and after the 3 years is up renegotiate the contract.
50% for 3 years is alot of money, you need to make sure that you can survive first and foremost.
and whatever the agreement get everything in writing.

**paul2145r** · 01-18-2008 11:24 AM

Is your investor a loan shark, or Russian, by any chance? Lol...

Okay: A few quick questions:

Will the 50% be going to the repayment of the loan only, or will it continue after the loan is payed out?

If it goes to repay the initial investment (plus a few percent for the effort), then it may be a viable option. Otherwise, it is just a way to extort money from your hard work.

Will he or she be a completely silent investor?

What happens when the individual want to change the way the place looks, for example... Will you have the decision-making ability to say no?

Will you be able to survive on 50% of the Profits?

Since it is a family business with yourself and your wife, it will make things a little easier. The biggest problem you will be facing, however, is having enough left over to cover your own bills. If you can work it out to where you draw a paycheck prior to the 50% split, then I think it has the potential of being a fair deal.

**rogercbryan** · 01-18-2008 01:59 PM

It sounds like you skipped over the first important step in the financing process. Have you applied for a loan from the bank? Why is this the first step? This is in many cases the most efficient way to get money. Do you have decent credit or do you have personal assets you can use to start the company. People all too often go searching for partners which dilute long term earnings before truly exploring the possibility of doing it on their own.

Your original post is fairly vague as well. Do you have a business plan? Do you know what you first year expenses are going to be (projected)? Do you have a financial plan for your company? Do you have estimated income? If you do not have the answers to these questions then it is far too early to be thinking about a partner as you have no idea what you have to negotiate with.

If you don’t know what you have (personal financing) and you don’t know what to expect (income & expenses) then you need to spend more time planning.