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11-12-2008 , 02:48 PM
I have finalized my business plan for a local sports bar and am ready to start pitching it to investors next week. Originally I was going to go after an SBA loan and if that option was to fail then use my own money. Outside investors were not even an option when I started this but recently word has gotten out that I am looking to open a bar. Without getting into my history and background lets just say my partner and I have a reputation for running very successful clubs/bars in the past.

Since word has gotten out we have been approached by numerous individuals who are interested in backing this business.

Now here is where I have zero expertise. What is a common scenario to give the investor in return for his putting up the money? There are so many ways to negotiate this that I want to start out with a clear and concise plan that can be re-negotiated later if needed.

I am going to ask that the investor put up 100% of the funds. I have been told by a friend who owns a bar/restaurant chain that to give no more than 25% of the business to an investor that funds 100%, especially since the partners will be silent and we will be working the business as it is our plan and knowledge.

Does this sound correct? 25%? If so any suggestions on how I should reimburse them? Quarterly dividends?

I was thinking that in order not to starve the business of operating capital that after 3 months of operation I would do a disbursement of 80% of profits. Giving the investor 25% of that and continue to do quarterly disbursement for the life of the business.

Thanks for any help.
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11-12-2008 , 04:06 PM
I assume you are taking a salary before profits? He's getting screwed in this deal if that's the case.
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11-12-2008 , 09:04 PM
First you have to determine if they will be debt or equity investors.

I'll assume they (and you) intend to be equity investors. In that case, what many (most?) investors look at is a five-year ROI. If this five-year ROI is within a certain window, they are interested. The window is different for each industry, but the investors I have experience with usually want to see [20%, 35%]. (I'm guessing that ridiculously high projections look...ridiculous)

Also, you're not going to find investors willing to put up 100%. They will want to see you put up some capital first.
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11-13-2008 , 01:34 PM
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Originally Posted by Adam Monroe
I assume you are taking a salary before profits? He's getting screwed in this deal if that's the case.
Why do you say that? I will be the one putting 70-80 hours a week in this place to get it going.
I am not sure if I am going to take a salary or not. I have been advised by two accountants that I should. I am not sure if I will, hence my reason for posting here.
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11-13-2008 , 01:59 PM
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Originally Posted by lordfoo
First you have to determine if they will be debt or equity investors.

I'll assume they (and you) intend to be equity investors. In that case, what many (most?) investors look at is a five-year ROI. If this five-year ROI is within a certain window, they are interested. The window is different for each industry, but the investors I have experience with usually want to see [20%, 35%]. (I'm guessing that ridiculously high projections look...ridiculous)

Also, you're not going to find investors willing to put up 100%. They will want to see you put up some capital first.
I know many instances where investors have put up 100% of the funding in bars/restaurants in the South Florida area. I just dont know what their terms were other than the case I mentioned in my OP.

The only reason I started entertaining the thought of outside investors is because they approached me. Like I said in my OP there is many ways to negotiate the deal and one of those could be me putting up some capitol but I am going to pursue 100% funding in the beginning and leave room for negotiating.

I am currently working on the ROI.

Thx
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