I'm getting involved with a small business in the food truck domain as an investor. I've agreed to purchase equipment ( fryers, tents, grills etc... ) as well as fund event fees, rental equipment. The actual truck may come later in the form of a monthly or weekly rental but for now its just spots at events like fairs, foodie events and large parties ( Canada Day etc... ). I give them advice on what type of events to attend, where to buy supplies and equipment etc... How should I structure the money I put into this business and how should I take out my portion of the profits after each event? Any advice would be appreciated.
The problem with small businesses is that profit is totally under the control of the operator. Lots of personal expenses can get buried in the company to lower taxes.
This is why you don't want to be a minority shareholder.
This deal should be structured as debt.
I do these deals often and wrote a book about it in 2014 called Invest Local. You can get it from Amazon and it's on Kindle and audio formats.
Hope this helps.
If you'd like to discuss the specifics of your case, just arrange a call.
Answered 6 years ago
It sounds like you may have a little fear in regards to the use of your money and or the return of your money. If this is the case, I would merely structure a non-rigid milestone based payout. So, If you are willing to invest $100k for example, I would look at what that $100k needs to be used for and when. As in any business, you may need to give a little more a little earlier to bridge cash flow issues. But trust yourself and look at the facts of the circumstance regarding releasing money early. As for when to take it out, we make investments to make more money, but the business always comes first. From the sounds of it, you are funding to create something, or proof of concept so to say. I wouldn't be too eager to pull money right now, but none the less, I would look at what it would mean for the business regarding cash flow for how you can take back your money. Again, always remember contracts can be flexible so you can always add stipulations for if you do particularly well at specific events, you get little extra money, versus if you do just ok at one you get little or no money. If you want to chat more about this, please reach out to me.
Answered 6 years ago