Honestly, if I were you I would pass. I had an internship with a businesses incubator where young companies received advice on this kind of things all the time, and from what you stated I would say you have the short end of the stick. There are so many things to consider for something like this, like for one you would need a legal agreement. You need to consider, like others said, what he is bringing to the table? 40k for 40% of a business to me seems really small, and if he is not going to give you a decent amount of his time working in his contacts, giving you business advice, and helping you work the business to some degree then I would say the offer is very small. 40k will likely not buy you the equipment and 3 vans that you would need. For all the businesses ive seen, this is one of the easiest to build. I would say a loan like others said is a much better idea, or even better yet working off your butt and building it without a loan. I would stongly recommend seeing if you have a local SCORE chapter that you could hook into. They have retired business people that will give you advice for free or cheap. If your look in to grow, especially fast, you will need a good mentor. I’m the end you have to decide, but to me it seems you are not getting near enough in this deal. I would think 10- 15%, with a cap on the deal. Also, another option in deals like this is to guarantee a certain ROI in a given timeframe, such as 80k in 5 years with company % ownership held by the other party until the payout or no ownership at all in the deal and only the payout. 40% is way too much in my opinion. (But then I said that already didnt I)
I declined the deal after seeking advice from not only you guys (tilted me in the direction I wanted to go) but advice from family, friends and even my fellow business owners that I deal with daily. It all led back to the same answer, he wants too much from the company at the investment he is willing to make. Yes, that is a lot of money right now to build with but 10 years from now that may be nothing to my overall income and I realize one day I basically sold out for a fraction of what it was actually worth just to get ahead. It sounded appealing but in the end I couldn’t do it. I mean, I’m flattered that a business minded individual who has succeeded in other aspects of business had looked at my company as a great investment and saw that I have built it great and that it has infinite potential but aside from that, no go. What a wild day, I still can’t believe I was faced with this decision.
Most business deals don’t work out.
But if we never sit and talk then ALL of them would not happen
Good choice on declining, 40 % is huge ask especially for a window cleaning company making over $200 an hour.
If this guy owns 6 companies he surely would have checked your companies year to date sales and realise it wasn’t what he perceived it to be ($200+ hourly) which may be awkward in future relations even though you didn’t initiate the conversation.
My biggest question: Do you have a big enough base of customers to put three more trucks on the road and keep them busy all year? That is a lot of man hours . If you have that much of a backlog or customer base, you should expand it on your own. 40% is way too big of a number
I just realized I was answering after you had declined the offer, but it was an interesting read.
I recently had someone say they could be our “shark”, when discussing how much water fed poles are, ro/di systems are $2k etc etc. We just bought our ez mini, along with other wfp accessories, with no help needed from a “shark”.
I believe most of us on this forum do a lot for our business. We do the research, we invest, we market, we do most everything related to our business to have someone swoop in and try to “invest” and control what we’ve worked hard for. Good for you on passing.
This is my view on taking on investors in this industry.
If a guy that started off in his basement eating baloney sandwiches and cheap home copied flyers and built it into a huge successful company that in turn was able to create this AWESOME forum.
I feel if your a dedicated has he was sky’s the limit!
Thanks Chris Lambrinides!
Oh … and to created your blueprint to his success… you don’t need a “shark.”
If you don’t have this book get it NOW!
40k is not a lot of money, plus you are going to bent over a barrel depending on the business set up. Once all established may even make the move of making it a company and voting you off the board. Again these are all guesstimates of what could happen not what has happened. If driven enough by your own motivation you could do things you want a lot faster then 10 years down the track. 24 hours in day it’s howmyoumuse them that counts. Wish you well for the future always seek advice when offered a shiny token.
My two cents:
This guy was hoping you were a sucker. 40K is hardly enough to buy one new van, let alone three. Wrapping them will cost a few thousand a piece. Filling them with tools for a crew of two would likely cost 5K plus, per van. And if you power wash, double that.
Then you have to find work for all those guys. Probably 5-10K a month in advertising.
All this, for the bargain basement price of 40%. I would have needed about 10 seconds to tell this guy “No thank you”.
Not to mention when you grow to that size, you are going to be marketing to a different audience and you won’t be likely making anymore of that 200 an hour. You have a crew(s) to keep busy. You now would have much higher liability insurance expenses, and all the expenses that come with having employees.
The infusion of cash wasn’t nearly big enough. Especially for 40%.
Years ago I had a guy who was working his way towards making me an “offer I couldn’t refuse”.
I saw it coming, and told him if I ever needed an imvestment that he would be the first call. I told him that I was comfortable with where I was, and had no plans for growth (bullshit).
Never heard from him again.