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Forum nameFinancial Feast
Topic subjectPartnership Question...
Topic URLhttps://www.businessownersideacafe.com/forums/dcboard.php?az=show_topic&forum=105&topic_id=51
51, Partnership Question...
Posted by lisasgourmet, Thu Oct-05-06 02:51 AM
Good Morning!

I recently met with the President of a very large insurance and investment company to look at a building they just purchased. It turns out the location and the building itself is absolutely perfect for my shoppe. They are going to renovate to suit, and allow me to use the first floor AND basement for $1500 a month (which is a steal considering where it is located!).

While talking with him, he asked if I was interested in a partnership. He really likes my idea and expressed interest in the business.

My question is ----- how does an investment partnership work? I am unwilling to give up any control over the product and/or day-to-day operations.

How does paying the return on investment work? I've been searching the internet for answers to these questions --- but the answers I have found are way too "finance-speak" for me.

Could someone break it down for me???

Thanks so much!!!
54, RE: Partnership Question...
Posted by wwcap1, Tue Oct-10-06 06:31 AM
Lisa: Basically a partnership of the type I think you're talking about can be very straightforward. The first trick is to value the company. The reason this is a "trick" is that it is likely that your prospective partner will be investing more money than the business is actually worth right now (using your financial statements), so you need to keep focused on potential.

You could get help from a local CPA to establish a value on your business. Once you have that value then you can negotiate the percentage of the business (based on the value just established) that you will allow the investor to have in exchange for their money or in-kind capital contributions. The deal can only work if the amount of money is enough and seen by you as a valid deal based on the percentage of the business to be traded for the percentage of the business.

There are also many options on how to structure this deal, so many in fact that I would be remiss to even discuss them. I would say though that you need to keep in mind a method to buy the investor back of your business if required.

Hope this helps.


Kent Capener
Capener Consulting, LLC
http://www.capenerconsulting.com
71, RE: Partnership Question...
Posted by wjtopp, Wed Oct-25-06 09:48 AM
You may want to talk to "business valuators". All they do is evaluate a business and put a price-tag on it as if you were going to sell it. Once the agreement is created and signed, you'll need to take out "key-employee" type insurance on each other and succession planning so the business will continue in a catastrophic event to either partner.

Regards,
Bill
JMC Consultants
76, RE: Partnership Question...
Posted by Mike63, Thu Oct-26-06 12:12 PM
>Good Morning!
>
>I recently met with the President of a very large insurance
>and investment company to look at a building they just
>purchased. It turns out the location and the building itself
>is absolutely perfect for my shoppe. They are going to
>renovate to suit, and allow me to use the first floor AND
>basement for $1500 a month (which is a steal considering where
>it is located!).
>
>While talking with him, he asked if I was interested in a
>partnership. He really likes my idea and expressed interest
>in the business.
>
>My question is ----- how does an investment partnership work?
>I am unwilling to give up any control over the product and/or
>day-to-day operations.
>
>How does paying the return on investment work? I've been
>searching the internet for answers to these questions --- but
>the answers I have found are way too "finance-speak"
>for me.
>
>Could someone break it down for me???
>
>Thanks so much!!!

Lisa

I think that it is important to at least understand some basics of the type of agreement that you are getting involved in. There is a book by Garret Sutton, Esq. called Own Your Own Corporation in the RICH DAD POOR DAD book series that puts everyting in terms that we understand. It discusses entities, the advantages and disadvantages of each plus it also gives examples.

Mike63


82, RE: Partnership Question...
Posted by Strategist, Sun Oct-29-06 07:53 PM
What a great opportunity!

This is really a legal issue. I suggest setting up an appointment with a lawyer.

Whenever I've seen people provide themselves do it yourself legal advice, it ends up costing more.