Have a business, met with an investor tonight. Few questions

[LVFishGirl]

I searched through google and found this forum and thought someone might be able to help with my questions. I have an aquarium maintenance company here in Las Vegas. The company is in the start up phase and I was seeking a small investment to make this into an LLC and some misc equipment that was needed, I had posted on craigslist hoping to find a fish enthusiast and local investor.
I was contacted by a man locally who is part of a business adviser group, they assists companies with planning and the creation of their company or with growth, exit strategies, etc.

I'm learning and not sure how this normally works, and had a few questions.
We presented our company, we need a very minimal investment, they are providing the LLC(paying for and getting everything together for it), the thousand we needed for equipment, business cards, etc and then getting us a website made. Also ipads to assist with scheduling, credit card processing and few other things, things we personally do not have the money for. They will provide their business services like accounting, help with marketing if needed, and then finding an angel investor if we needed it in the future. In return they ask 5% over 5k a month we are paid out, we can not make less than 5k. This is the part where I am fuzzy,..The rest goes back into the business correct? Now they said something about 15%(I can not remember what they called it),... I understood the part that if we sold the business they would get 15% but it seems also at the end of the year they would get 15% of the profit,.. Is this correct? Does the 85% then come back to me or does it have to stay with the business or can I pull some of that? Will I only be able to pull 5k a month for myself from the business if I do this set up with them? I've been thinking about that from the meeting and it'd kind of suck to make tens of thousands a month(aquarium maintenance is lucrative) but monthly still only be able to make 5k for ourselves. Should I say I want more each month? Assuming this is before taxes this isnt a lot when this is supposed to be wages for my fiance and I who both do work in the business. I know this is vague but I can not remember the term for the 15% and thought someone who does investments in businesses may be able to explain or let me know if this is fair, or if I should counter. I meet with them on Tuesday to get this going, any help would be appreciated.

 

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[TK1]

Ask yourself 1 question:

Is it ABSOLUTELY IMPOSSIBLE to carry on with your businesss and make it a success without taking outside funding?

The Best Equity is Sweat Equity « blog maverick

 

[Denise]

I am also in the process of looking for funding to start business. What you described does not sound good to me. You have to understand completely what they are telling you before agreeing or you will surely be sorry later!!

Have you tried getting a loan from the bank? Do you have equity in your house to get a home equity line of credit to use? Do you know any wealthy people who would like to see you succeed in your business and who are able to loan you the money? Friends or family? These are all the avenues I have looked into, and continue to look into.

Good luck and don't give up!

 

[Likwid24]

Have you tried getting a loan from the bank? Do you have equity in your house to get a home equity line of credit to use? Do you know any wealthy people who would like to see you succeed in your business and who are able to loan you the money? Friends or family? These are all the avenues I have looked into, and continue to look into.

This is what I would do first. Then if that fails, I would just try to build my business slowly before jumping in feet first like you are. You can get an LLC done for less than $500 by an accountant and less than $300 if you use a website like legalzoom.com. Try and see if you can find used equipment on the cheap. I don't think it's necessary to go out and by Ipad's and have a completely hooked up website just yet. You can have a website built real cheap just to get started then update it in the future.

I would use an investor as an absolute last resort if I had absolutely no where else to go. For your type of business, I don't believe you need that. Start off slow. Save as much as you can and if your good at what you do then all your problems will be solved withoiut having to give up any of your company.

 

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[LVFishGirl]

This is what I would do first. Then if that fails, I would just try to build my business slowly before jumping in feet first like you are. You can get an LLC done for less than $500 by an accountant and less than $300 if you use a website like legalzoom.com. Try and see if you can find used equipment on the cheap. I don't think it's necessary to go out and by Ipad's and have a completely hooked up website just yet. You can have a website built real cheap just to get started then update it in the future.

I would use an investor as an absolute last resort if I had absolutely no where else to go. For your type of business, I don't believe you need that. Start off slow. Save as much as you can and if your good at what you do then all your problems will be solved withoiut having to give up any of your company.

Unfortunately even working years as head supervisor for a top maintenance company in Las Vegas you do not get paid much at all(12 an hour, plus vehicle/gas and this was top pay in Vegas for this) and therefor we have no savings. Once my fiance was replaced by someone for 9$ an hour we had a few clients call not liking the new guy and have been living off of that. My fiance is extremely well known in this line of work and we has plumbed multiple local fish stores and we already have a top fish store here we work with. We have about 200 potential clients to advertise to immediately most he worked with at his last company but have switched to various other companies after he was replaced. We just arent making enough right now to even pay bills so the 200$ for the business license has been literally impossible. We just can not safely advertise or even touch commercial accounts(a lot of doctor offices and restaurants) without a business license so we're stuck. As soon as we have the business license things would be awesome but it just hasnt been able to happen yet for almost a year. We are making over what he did working for a company on a handful of jobs but 2k a month doesn't go far at all. We're in our early twenties and do not have a house to pull from or anyone to borrow from.

I do not want anyone having a say in our company, but we do not know how else to get things going. I know we do not need ipads or a website just yet, I was trying to make this sound better to myself I think. For their investment it seems like a big return. I just didn't understand if this ties up the profit of the business and we just get our wages and then the profit is split up at the end of the year. I thought perhaps this was standard for business investments and someone would be able to clarify. We met at the bar/lounge next to their office and it was a little loud. It sucks, I know as soon as we're legit we'll be pulling in thousands. Anymore advice is appreciated.

 

[brob742]

Just save some money to get the LLC started and stay away from those guys. It sounds like this is a business that doesn't need a ton of capital to start turning a profit. Get the business legal and start getting some accounts and then after you get some revenue you can invest in some equipment and start growing. It just doesn't seem like they are providing very much value that you couldn't work for and save up in a little time.

 

[yveskleinsky]

Check out your local Score.org office--odds are you can find a mentor there that can help you grow. If you are currently profitable, you can probably look into a microloan thru the SBA (again Score can help you with some options).

Personally, I wouldn't give away 15% of your business for supplies and such that you don't currently need--and it makes a lot more sense to grow within your means and not take on debt if you don't need to. Also, I would be highly suspect of any investor that wants to give you supplies/money that you don't need at this point. Proceed with caution.

 

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[Denise]

They are asking for too much, and they are want to start you with too much "stuff" too early. You don't need all of that stuff to get going. If you need to pay for licenses to get started, I would set aside money each pay, and don't touch it, until you have saved enough to get your licenses. Then, rent the equipment you need (that you don't already have) until you are bringing in enough money to buy your own equipment (if that even saves you money... maybe renting would be more cost effective?).

 

[DeletedUser2]

couple K for the headache of investors?

nope.

Now, I raise money, have investors, partners ect.
and i think its great if you have the tools for dealing with them.
but if you dont, they can eat your lunch.

you will probably miss the sentance they slip into the "equity" agreement they hand you.
where they get more if you dont perform (less than 5k a month)

look, new mexico has a 50 Dollar LLC you can do.
you get it registered as a forigen corp doing biz in Las Vegas.

Print yoru own 100 biz cards or 50 from vista print, after you get a few, handed out, you will know what to put on your next ones that makes it better.
dont get 1K worth of cards you will throw away 990 of them later.

what cant you afford for 300 bucks for cleaning supplies?

ask some friends,
anything

stay up late for a couple nights and read up on LLCs Corps, and other business topics.
Look up your competitors. do some research

your just to small to take investor money at this level, and get anything in return but a hard lesson and heart ache.

 

[theBiz]

you will probably miss the sentance they slip into the "equity" agreement they hand you.
where they get more if you dont perform (less than 5k a month)

look, new mexico has a 50 Dollar LLC you can do.
you get it registered as a forigen corp doing biz in Las Vegas.

Print yoru own 100 biz cards or 50 from vista print, after you get a few, handed out, you will know what to put on your next ones that makes it better.
dont get 1K worth of cards you will throw away 990 of them later.

Zendophin...... always putting things in perspective. Everytime someone has "work" to do in their mind you help them realize its a 10 minute job. i think all of your comments should be this from now on ..... "Just do it". Whoever came up with that at Nike was a former entrepreneur for sure.

 

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[PatrickP]

LVFishGirl
PLEASE listen to everyone above. How much money do you REALLY REALLY need? I would NOT get an investor.

So you want to know how do you do it?

Specific example in real life not some fancy book/cd person telling you this but someone who actually made it happen.

Forget the LLC if you are sued you don't have anything for people to take and an LLC wont protect you anyways as the one with the most money to pay an atty will win.

You do NOT need more equipment it would just make things easier for you well easy and starting a business do not mix.

My friend and I started a lawn business with ZERO equipment.
Total cost to start was $30
We put a reader ad in the local pennysaver. Got a call guy wanted us to cut his lawn. I told him OH I wish we could but the only crew we have available does not currently have a lawnmower. Guy says oh that is ok I have a push mower they can use if you like

I said ok well it was an electric mower with an extension cord lol My friend and I did the best job ever, we even raked up the dead grass and leaves and told him we were doing that extra for free. The kind man said hey if you have other jobs you can use my lawnmower.

Life IS good and if you are kind, karma rewards you. We got 3 more jobs and used his mower until we could spend the $99 to buy one of our own. Then we got a weed wacker and so on.

I KNOW it can be repeated because my friend moved 1200 miles away, paid $25 for business cards and bought a $150 mower and $50 weed wacker. He went door to door wrote the price to cut the grass on the back of the business cards and stuck them in the screen door. He now makes over 80K(yes yes I know not fastlane and he bought himself a job OH the horrors ) working less than 20 hours a week and he is happy and doesn't want to work more nor need to make more money.

Fish you can start TODAY do not wait, do not make excuses just get going!


BTW I now have a company by myself that by next week will have sales of 1 mill for this year with 40% of that being my very own money and it is still run as a sole propiatership. Don't put the cart before the horse. Get your business going, get money coming in, then worry about all that extra BS.

 

[yahdmon]

It seems your fiance shouldn't wait, he is a lucky guy having a fast lane gf and now fiance. You did the right thing by getting a second opinion and while the popular might not be what you want to hear, it sure is why you need to hear. All of us understand your plight and I put it this way.

You are merging onto the fast lane and you want to floor it, which is why you want investor monies but that is not what you need to do right now. Take your time and get up to cruising speed and you won't regret it later.

Tell the investor thanks, but no thanks. You want to take it slow. Do not be anxious.

 

[CPisHere]

This would be a mistake. Credit cards would be a better option, frankly.

 

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[mayana]

We put a reader ad in the local pennysaver. Got a call guy wanted us to cut his lawn. I told him OH I wish we could but the only crew we have available does not currently have a lawnmower. Guy says oh that is ok I have a push mower they can use if you like

Hahahaha I love that. That is SO awesome.

PLEASE, LVFishGirl, please take everyone's advice here. Bootstrap your way - you can create almost any kind of business with absolutely no outside money. It is even possible to do it without borrowing money. Hang around this forum - you'll get some great ideas.

 

[TK1]

lvfishgirl
please listen to everyone above. How much money do you really really need? I would not get an investor.

So you want to know how do you do it?

Specific example in real life not some fancy book/cd person telling you this but someone who actually made it happen.

Forget the llc if you are sued you don't have anything for people to take and an llc wont protect you anyways as the one with the most money to pay an atty will win.

You do not need more equipment it would just make things easier for you well easy and starting a business do not mix.

My friend and i started a lawn business with zero equipment.
Total cost to start was $30
we put a reader ad in the local pennysaver. Got a call guy wanted us to cut his lawn. I told him oh i wish we could but the only crew we have available does not currently have a lawnmower. Guy says oh that is ok i have a push mower they can use if you like

i said ok well it was an electric mower with an extension cord lol my friend and i did the best job ever, we even raked up the dead grass and leaves and told him we were doing that extra for free. The kind man said hey if you have other jobs you can use my lawnmower.

life is good and if you are kind, karma rewards you. We got 3 more jobs and used his mower until we could spend the $99 to buy one of our own. Then we got a weed wacker and so on.

I know it can be repeated because my friend moved 1200 miles away, paid $25 for business cards and bought a $150 mower and $50 weed wacker. He went door to door wrote the price to cut the grass on the back of the business cards and stuck them in the screen door. He now makes over 80k(yes yes i know not fastlane and he bought himself a job oh the horrors ) working less than 20 hours a week and he is happy and doesn't want to work more nor need to make more money.

Fish you can start today do not wait, do not make excuses just get going!


Btw i now have a company by myself that by next week will have sales of 1 mill for this year with 40% of that being my very own money and it is still run as a sole propiatership. Don't put the cart before the horse. Get your business going, get money coming in, then worry about all that extra bs.

amen.

 

[PatrickP]

wow I just saw that lvfish, the op, has only made 2 posts and hasn't been back to this thread since her second post.

 

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