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Need some business advice please!

post #1 of 22
Thread Starter 
Hi!

I have been approached by a family friend who wants to invest in my business to set up a retail store.

He wants me to invest 50%, he will invest 50% and we will share whatever profit/loss the business brings equally. However, I am also bringing my expertise & know-how to the business.

I want him to invest financially in the business, I will bring my knowledge and skills and we can share the profits 50-50. How do I word such an agreement? Is it even possible?

Another option I was thinking of is, he buys out my brand/business, and he will also get all future customers/current clientele. I will still continue to contribute with my skills/baking/decorating the products. In that case, do I take a salary from him for that? Or is there any other way to set this up?

Or do I have him fund my retail store, like a venture capitalist/angel investor? Has anyone done anything like that before? How does it work for a bakery/cupcakes business?

Any advice and other ideas on setting up this business is really appreciated. Thanks!!
post #2 of 22
You could contact a legal advice or something. Like a lawyer or someone on how to word that document or what the procedure would be. I wouldn't sell him my ideas. They are your ideas after all...who knows ..you may make big someday with your ideas icon_smile.gif
post #3 of 22
Thread Starter 
Thank you RVCupcake. Yes, I am going to contact a lawyer but I also wanted to get the input of those in this industry who have been through such a situation before... icon_smile.gif

Anyone?
post #4 of 22
A partnership can work in the best of circumstances. But usually circumstances are not ideal... If the friend has no business experience and no baking experience, letting him have a voice in decision-making can present serious problems. I suggest you first speak with an attorney who can help you make a list of important issues and suggest ways to form a partnership.Then have a serious discussion with this family friend.

As much as your CC friends can contribute opinions, we are not trained in all aspects of expert legal advice. Good luck.

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post #5 of 22
Quote:
Originally Posted by fcakes

He wants me to invest 50%, he will invest 50% and we will share whatever profit/loss the business brings equally. However, I am also bringing my expertise & know-how to the business.

I want him to invest financially in the business, I will bring my knowledge and skills and we can share the profits 50-50.



But who does all the work? If it's you, I wouldn't split 50/50... you're bringing more than 50% to the table.

Quote:
Originally Posted by fcakes

Another option I was thinking of is, he buys out my brand/business, and he will also get all future customers/current clientele. I will still continue to contribute with my skills/baking/decorating the products. In that case, do I take a salary from him for that?



If you're staying on as an employee after selling your business, of course, you'd be paid as an employee--unless you're volunteering to work for free during a transition period or have your temporary salary included in the sale.
post #6 of 22
I agree with CWR41...that 50/50 seems pretty bad when you think about who's going to be doing all the work. I'd think twice about that, or at least let him be the investor but you make the decisions. If he wants to come in and tell you what to do then he could really screw things up.
post #7 of 22
Thread Starter 
Great! Thanks for the input! This is what I was looking for because I wasn't able to figure out if 50/50 was a good idea icon_smile.gif

If he becomes an investor, I would ask him to invest 20%, 30% or 50% and share profit/loss accordingly right?
post #8 of 22
HE wants to invest in YOUR business and take it to the next level. What do YOU want? I'm not a lawyer or anything like that or even in business but IMHO, he's getting all of the advantages of your hard work over the years buliding up YOUR clietelle and recipes. I think HE should provide ALL of the money and maybe get 50% (or less) of YOUR profits as a SILENT partner.
post #9 of 22
If he gets 50% of all of your future profits just for offering up 50% of the startup..then I'm in the wrong business. 50/50 sounds like a sour deal if you're the one who is doing the baking. There'd be no business if it weren't for you creating the goods. I would find out what may be standard in these partnerships, but 50/50 for your situation sounds like a bad deal for you.
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Hobby baker for now.....
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post #10 of 22
Thread Starter 
Thanks so much for the input! I think him providing all the investment and taking 50% of the profit sounds good to me but how do I put it across to him?

Yes, I will be doing all the baking/decorating/managing the kitchen/inventory etc. He will be there day to day, supervising staff and handling the cash register/customers.
post #11 of 22
Quote:
Originally Posted by fcakes

Thanks so much for the input! I think him providing all the investment and taking 50% of the profit sounds good to me but how do I put it across to him?



Of course, that sounds good to you... HE provides ALL the investment and has 100% of the risk! As an investor, I wouldn't do it... why would I want to share 50% of my profits with anyone who had none of the risk? That's not a partnership.

Quote:
Originally Posted by fcakes

Yes, I will be doing all the baking/decorating/managing the kitchen/inventory etc. He will be there day to day, supervising staff and handling the cash register/customers.



It sounds like he's going to put in just as many hours as you would.
post #12 of 22
Thread Starter 
Quote:
Originally Posted by CWR41

Quote:
Originally Posted by fcakes

Thanks so much for the input! I think him providing all the investment and taking 50% of the profit sounds good to me but how do I put it across to him?



Of course, that sounds good to you... HE provides ALL the investment and has 100% of the risk! As an investor, I wouldn't do it... why would I want to share 50% of my profits with anyone who had none of the risk? That's not a partnership.

Quote:
Originally Posted by fcakes

Yes, I will be doing all the baking/decorating/managing the kitchen/inventory etc. He will be there day to day, supervising staff and handling the cash register/customers.



It sounds like he's going to put in just as many hours as you would.

then what do you suggest? I invest 50% plus bring my skills too?
post #13 of 22
I would be very wary of this situation. Are you and your family friend both the kind of people that can be objective and see both sides in an emotional issue? There's a lot of potential for things to go wrong. I'm not in business, but I've read a few small business books. I know that doesn't make me any kind of expert, but I just wanted to say that they suggested going over every scenario with your potential business partner ahead of time, and put it in writing, with a lawyer guiding your way (and make sure it's a lawyer who is not favoring one side over the other). Be sure to go over the "what-if" scenarios, such as if business is not going well, or one person wants to quit and the other wants to keep going, etc. Good luck!
post #14 of 22
Nope... how many yrs (or time) did it take you to get to this point. What skills did you acquire, what classes did you pay for and take. What about all the material you already invested to get where your at. All of those are already part of your investment.

If he puts up $1,000.00 (just saying) and its a 50/50 your part would be $1,000.00 but... you spent $500.00 in classes, cake pans and other supplies, business cards, R&D, etc. Then your part would be $500.00 cash plus all this knowledge and supplies & materials.

Further more, what about the customers you already have, do they come along with the partnership or do you retain them as yours.

Then, you should also discuss the possibility that the partnership does not work out as planned and you would like to go your separate way. Who gets what in this case. People don't get married on bad terms but they sure divorce on them, that's what there are prenuptials. You should treat this as a marriage because you will spend a lot of time together.

These are more questions to ask both an attorney & your friend.
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Virginia 323.253.8213
www.urbanainez.com
He is the man of my dreams, my prince; He gives me the desires of my heart, He completes me. His name is Jesus
Reply
post #15 of 22
Quote:
Originally Posted by fcakes

then what do you suggest? I invest 50% plus bring my skills too?



I'm not suggesting anything... there are too many scenarios.

HE wants a 50/50 equal partnership
YOU want a buy out (he'd be the owner, you'd be the employee)
OR, you want a silent partner/investor (who would be paid a percentage of profits until the "loan/investment" is paid off)

The two of you need to decide if this is a partnership, buy out, or a loan before you can continue.

Here are some thoughts to consider... If he's wanting to work daily too, his skills are worth something as well. If this is going to be a partnership, and you want it to be successful, neither one of you would leave your skills at home. (Also, everything comes to an end - your contract will need an exit plan.)

In a partnership, both parties need to bring something of monetary value. If either one of you tries to "sell" the other on the idea that you should make them a "partner" without having a tangible contribution, it won't work. In most cases, one party needs/wants the money, but the person with the money doesn't need the other--that's what employees are for. The person who may not have much to contribute other than "good people skills" or a knack at something, or offers to provide help in other ways will never be considered an equal partner by the one who actually paid for (pays for) and owns everything else. And, what happens when the person who offers alternate contributions conveniently stops what was promised, like showing up for work at the crack of noon, works for an hour, takes an hour lunch break, then goes home? These are a few things to consider when it's not a 50/50 partnership from the start.
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