Investors

[Flow]

Hi,

I am starting a small biz in BKK. I will be the managing director/owner, I will run the business and I am investing 150,000 Baht.

I have two investors:

Mr. X is investing 100,000

Mr. Y is investing 150,000

What should be their percentages on net profits.

I am thinking something around:

17% for Mr. X

24% for Mr. Y

I am not too good on the financial side of things... suggestions much appreciated.

Edited February 24, 2005 by Flow

[thaiaan]

Hi,

I am starting a small biz in BKK. I will be the managing director/owner, I will run the business and I am investing 150,000 Baht.

I have two investors:

Mr. X is investing 100,000

Mr. Y is investing 150,000

What should be their percentages on net profits.

I am thinking something around:

17% for Mr. X

24% for Mr. Y

I am not too good on the financial side of things... suggestions much appreciated.

<{POST_SNAPBACK}>

Don't need to be a financial whiz,just know how to divide.

Mr's X and Y are being shortchanged according to the amounts they are investing.

And a business that only costs $10,000 to start won't be hauling in the bucks.

[Vit42]

Actually it's a bit more than straight division. In your example, the total investment is 400,000 so divide each amount per investor by the total to get the following percentages.

You: 150,000/400,000 = 38%

A: 100,000/400,000 = 25%

B: 150,000/400,000 = 38%

However, as you said, you will run the business. Assuming that the other 2 investors just sit on the sideline, you should get a higher percentage and they should get less. However, this also depends if you get paid and the amount you will be paid to run the business.

If you are the only worker/investor, my recommendation is for you to take part of your profits in terms of a salary (also depending on tax benefit) and split the actual profits as calculated above. Otherwise, you'll be trying to justify the value of the profit percentages to the other investors.

Last note, if you choose to use the valuation approach, you need to consider who added value in what ways. For example, who's idea was this business (inventor value), who has the business connections, who contributes space/equip/property, and so forth? Even if they don't participate in day to day operations, the other investors may be adding value in other ways and should be compensated accordingly.

Best of luck to you. BTW, most big business started out small so even your $10,000 business has potential!!!

[Flow]

I really appreciate your replies. Many thanks.