This might sound a bit silly, the last few months we have focused so much energy and money into our business
that we are now starting to see this business as a long time investment
we are in the process of getting a 35%rent reduction on our store and this means we will be saving about 2.5k in rent
the Bussiness has turned from into a solid investment and more importantly creating cash flow for us
We have a bit of debt on our Bussiness and we are now looking for a silent partner / investor to buy a share in our bussiness
Inany one has any thoughts please let me know
In that case a third party wouldn't probaby be a beneficiary of your trust so you would have to transfer part of your business to them. In NSW this would involve stamp duty. You would also be up for CGT if there was a profit. Then you have to factor in what do they get for their money, how do you compensate yourselfs for working extra if they won't be working in the business. An investor will probably want to pay so much as they would recouperate their injection within 1 to 2 years.
Watch out for disputes. make sure you have a written agreement on how to resolve these. He may accuse you of playing down figures etc.
What if he wants out, divorces, or goes bankrupt too? or dies!
JP if I remember correctly you have struggled with this biz for something like the last 1-2 years. You say you have now managed to turn this around.
Couple of thoughts. Businesses do not initiate a capital raising, joint venture/partnership or share sale without good reason.
The reasons a business might do this;
- pay down debt (to reduce leverage and cost in order strengthen your balance sheet). This would generally mean a restructure or reposition for further growth,
- partners need to bring more than cash to the table so these types of arrangements are usually designed to enhance skill/knowledge, connect with new markets, access IP etc etc.
- position the business for sale,
- JV for sales and marketing/projects etc
A partner whether they be silent or otherwise would want to (or should want to) see some of the proceeds go to paying down business debt, improving profitability etc.
If you're looking to redeploy capital from a share sale into another investment (and I'm guessing property here) you need to do the numbers big time. If the business is doing well enough to attract an investor then you have to ask yourself why you aren't investing in it yourself (growth expansion) or why another investment might offer better returns.
If I had a biz that was returning say 11% net and another investment offered say 13% you would have to ask yourself is the increase in return worth the effort and what you have to give up. In a very large business that might be justifiable but it's difficult to make a case for a very small business.
In the early 00's I lived in Artarmon. There are 2 mixed businesses in that block of shops. Two Lebo brothers bought the one at the south (city) end. Within 6 months they had turned it around and doubled the return on it. 18 months later they bought the other one and did the same thing. Last I heard they own 5.
If you've figured out how to make your business work then why not think about growing it into another empire. There are a few billionaires in Aus who started out this way.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Terry no residential properties are securing the business loan.
Yours in FinanceJpcashflow wrote:Hi terry two my properties are securing the Bussiness
I don't think this would be correct. You have a loan which may have been used to purchase the business. Probably as Richard said you have real property securing this loan.
I was just thinking, from what was written above, if you had a business which was securing the loan then you would be breaching the loan agreement in selling part of the business. Probably not the case though.
What do you call a good return?
JP you're basically doing a debt for equity swap.
You'll need to do numbers on this to see how it spins out but if you pay down debt (tax deductible cost) and you get a concomitant rise in profit that will raise your tax liability.
You will also have to split any profit by the ratio of ownership with a new partner/shareholder.
I'm not seeing a lot of benefit here.thecrestParticipant@thecrestJoin Date: 2004Post Count: 992
Doesn't make sense or am i missing something ?
You work hard, get the business to a good point, then want to share or sell a part to someone else.
Why do that after working hard to reach this point where it's " a good investment" ??
Doesn't sound right to me.