mainor5251 Posted September 28, 2015 Share Posted September 28, 2015 Has anyone taken on an investor/silent partner and it ended up being a positive experience? I can continue to grow slowly maybe having to pass on an opportunity here and there but in the end I own business 100%. Taking on investor would mean giving up equity since investor is not interested in any type of loan model by itself. Plus would infuse 10-20k into the business and could most likely include a line of credit for future expansion. First thought is I would regret having a minority equity stake still on the books long after that initial investment usefulness. Knowing there could be a line of credit to continue to expand and upgrade makes the deal a little more attractive since the cost of decent amusement equipment is what it is. Thoughts or comments? Link to comment Share on other sites More sharing options...
mainor5251 Posted September 28, 2015 Author Share Posted September 28, 2015 And I did search a read through some of the old post but didn't see many useful post about subject. Link to comment Share on other sites More sharing options...
BouncyBalls Posted September 28, 2015 Share Posted September 28, 2015 IMO I think you would regret it and it could end ugly. Partners don't work in a cash business, if one partner is dishonest could be thievery going on. Try to grow by not using debt as much as possible. Link to comment Share on other sites More sharing options...
Gumball Posted September 28, 2015 Share Posted September 28, 2015 Most vendors we talk to try to avoid sacrificing any equity for immediate capital. It's better to sacrifice a small opportunity here and there than to take on debt. Link to comment Share on other sites More sharing options...
hanihotdog Posted September 28, 2015 Share Posted September 28, 2015 The only partnership agreements that I have seen work are we are one person finances the company 100%, and owns 100% of voting shares. Other partners are paid with phantom stock for reaching certain sales goals and profitability. There are agreed upon milestones where either partner can get out with a shotgun clause. Link to comment Share on other sites More sharing options...
hanihotdog Posted September 28, 2015 Share Posted September 28, 2015 It would probably be a good exercise for you to put in writing why anyone would want to invest $20,000 into your business.... make sure to include how you plan on getting their money back, and how much they should expect to make. I would love to read that post! I think we would all find a lot of value in it. Link to comment Share on other sites More sharing options...
ReillyNoFun Posted September 28, 2015 Share Posted September 28, 2015 I don't like the idea of taking on a silent partner, once you can get your business on its feet losing the equity wouldn't be worth it, imo. I don't vend full time so my growth has been slow - I just try to re-invest the money that comes out of my machines into more equipment (I'm lucky to be in Canada doing $1/$2 vends not just quarters), rather than taking on debt to expand my route more quickly. I'd also be interested to read what more experienced vendors would do if they had 20K to invest into their businesses Link to comment Share on other sites More sharing options...
mainor5251 Posted September 28, 2015 Author Share Posted September 28, 2015 I hadn't even given it a thought until a friend approached me. The first thing I thought of were all the negatives and why not to do it but do see some advantages of the extra cash and line of credit. If I was an investor I don't think I would invest in a cash business unless it meant guaranteed payments but I'm not the investor here. Mulling it over til I see him on Thursday. Link to comment Share on other sites More sharing options...
havending Posted September 29, 2015 Share Posted September 29, 2015 Never loose an account because of lack of amusement machines or funds. Partner up with an amusement operator. Take the bulk/flat and farm out the other stuff. Part of an account is better than none of it. Link to comment Share on other sites More sharing options...
AZVendor Posted September 29, 2015 Share Posted September 29, 2015 I think this is a situation where you should be the one looking for an investor, not one coming to you. How would your friend even know that he would want to be in this business? Unless you've shared a lot of information about your business with him he could only be looking at it as a cash business. What does he want to hide in it? Just some thoughts. Link to comment Share on other sites More sharing options...
musser Posted September 29, 2015 Share Posted September 29, 2015 There is no such thing as a silent partner. The golden rule: he who has the gold rules. Link to comment Share on other sites More sharing options...
TWvend Posted September 30, 2015 Share Posted September 30, 2015 Partnerships do not work ! Repeat . Partnerships do not work! Repeat. Partnerships do not work ! If you need funds and/or line of credit and cant get it at the bank , and have an investor willing , figure out a fair interest rate and that's it. They are making interest on a loan , period . That person should have no say in or claim to the company whatsoever. Link to comment Share on other sites More sharing options...
SyTheCandyGuy Posted September 30, 2015 Share Posted September 30, 2015 I'm relatively new to vending but 20+ years in small business, my advice. Don't. Ever. Never seen it work. If you're that desperate for 10k that its an opportunity that just can't be passed up find another way. Sell your car and buy a cheaper one, remortgage, personal loan or last resort get a credit card! Having said that if you can't afford it you can't afford it. Plough as much back as you can, borrow as a last resort, sell equity never. Link to comment Share on other sites More sharing options...
mainor5251 Posted October 1, 2015 Author Share Posted October 1, 2015 Everyone pretty much confirmed my feelings, just wanted to get more perspective to make sure I wasn't making a mistake turning down an investor. Satisfied with were I'm at and where I'm going. Link to comment Share on other sites More sharing options...
The Mage Posted October 3, 2015 Share Posted October 3, 2015 Partnerships can work, but everything needs to be in writing. One rule is that if both are working in the business, each job must be specified to only one person. Any time you have 2 or more people responsible for something, they each think the other person will do it. A silent partner can be beneficial, if you set things up properly, and again rules put into writing. There are plenty of people who are perfectly happy investing, and getting a monthly check for a portion of the profits. You may never hear from those people as long as the money is flowing. But you would want a way out for the both of you. If the investor wants out, you buy him out at a reduced rate. If you want him out, you buy him out at a premium. The reason to use investors is to expand faster at little to no cost to you. It can take a while to start making a profit, but using investors can change that. They pay for the equipment, and you're making money from day one. You share in the profits, but you benefit more due to the work. If anything you pay yourself a wage, or a commission for all the work being done, before the profits are paid out. But this is only one option for using investors. Another is to borrow money from them. This is a much simpler way to do business. They have a guaranteed return, though lower then if they were investors. Benefits are less work dealing with the finances, and a lower payout of the profits. Drawback is if the business fails, you still owe the money, where an investor would loose out with you. Private borrowing is only good if you can beat what you can get from a bank. There are many people who look to loan money because they can beat the return of a CD, and often have a fear of the stock market, or (if older) have a need for a more fixed income. We shouldn't fear investors, or private money. There's a reason Facebook, Netflix, Apple, Google, and many other successful companies use investors. A lot of what I mentioned above comes from what I have learned in real estate investing. There's no reason why any of this can't be applied to vending. Link to comment Share on other sites More sharing options...
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