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    5 Replies Latest reply on Aug 13, 2011 7:21 PM by ACPG_Inc.

    So I'm the little guy

    dreams2reality Adventurer

      Ok I am the little guy. I  live with my family one only one income. I have the next "big idea". Now say I get  in contact with the big guy. He has the resources and connections to make this a reality. He says lets go for it. But, I have no money. I cannot provide an initial investment other than the idea. Is there an agreement or some way of having the big guy collect a large percent of profits(not all)  until he recoups his investment? Then we come to a pre established consensus that will involve me collecting a higher percentage of profit?

       

      This is just a general question on if this is ever done. Or is it even a possibilty.

        • Re: So I'm the little guy
          ARCHIMEDES EnRich Adventurer

          There are no magic answers.  Your posting seems to say what if.  What if is just so much wishful thinking.  Let us suppose you really have found something you believe can become something big.  START by investing approximately $10.00  in yourself and buy the book THINK and GROW RICH by Napolean  Hill.. The paperback version is fine.  Go to the Salavation Army, if you like,  and you might find it for a dollar.  If you can master that one single book you can obtain what ever you want.  Charles Faber

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          • Re: So I'm the little guy
            Tracker

            Hello dream2reality,

             

            I believe that if the agreement is written properly, you can indeed write it  however you want (within legal reasoning).  I would advise you have a lawyer help you though to avoid any loopholes.  Something you might want to do is look into getting more than one investor, with smaller amounts from each.  That way no one person could try and claim full ownership and bypass the agreement.  Make sure you have a well written business plan, I know the US Government provides a website to help people with writing them.

             

            Good luck!

             

            ~Paul

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            • Re: So I'm the little guy
              ArcSine Scout

              D2R, your intuitive sense of how such a deal might be structured isn't merely possible...it's actually how many similar deals are arranged, at least as to the underlying principle you've described. There are a hundred-and-one flavors and permutations with respect to the details, but the fundamental idea is the common base. (Of course, the details are very important in these creatures, and so you'll want to drop a little coin for professional guidance on the legal, tax, and financial aspects, as already noted in previous posts. Much more often than not, a wise investment.)

               

              But skipping the details, it's pretty common for the money partner to receive some X% of the profits, until such time as he/she has recovered (a) their investment, plus (b) an additional amount which represents an agreed-upon profit or return on their investment (analogous to interest on a loan). The total amount of such excess, or profit, they receive would most likely include a time component in the formula....i.e., the faster a lender / investor gets repaid, the less total interest / return they receive.

               

              During that phase you'd probably be receiving some Y% of the profits, for living funds, etc. Your motivation is usually to get Money Partner paid out as soon as reasonably possible; but if he's smart he also wants you to receive enough of the profits early on to keep you motivated.

               

              From here you easily extrapolate some of the obvious variations. Maybe when Money Partner has gotten back, say, 75% of his investment (so his amount at risk is much smaller than initially) perhaps the X% / Y% allocation of cash flow adjusts to become a little more favorable in your direction. And / or maybe his effective "interest rate" on the remaining investment drops, especially if a little time has passed and your "big idea" is proving itself in the real world, such that the business has less perceived risk than it had before its launch.

               

              Best of luck with it!

              • Re: So I'm the little guy
                phanio Pioneer

                Everything is negotiable in business.  Approach a big guy, pitch the idea and your deal. Then sit back and listen.  They will either agree, deny or suggest their own structure (equity investment instead of royalty).  Then, evaluate what happens.  Once you agree, the big guy should draw up the docs.  You then take them to an attorney and let the attorney look them over.

                Just know that you can negotiate and always keep an open mind.

                • Re: So I'm the little guy
                  ACPG_Inc. Wayfarer

                  Phanio is right. You can negotiate anything. The capital plan you have outlined is very similar to many startups' plans. The most important thing is that you have your own lawyer review the documents that the investor has drawn up. If it's an institutional investor, they generally do things pretty similar every time especially with smaller investments. But you still need to have it reviewed by your attorney. You need to understand that their attorney doesn't work for you. It's not his job to make sure you're safe. That's why you need to find your own attorney who's job it is to represent you.

                   

                  I also wanted to ask whether you are actually interested in the running of the business. What your end goal is determines how you should go about finding investors and how the final arrangement should be drawn up. Do you want to parachute out of the company in a couple years? Do you want to be CEO for the next 10 years? Do you have the business knowledge to run the business? Perhaps your best option is to just sell the idea and be done with it. That way you don't have to worry about anything and can walk away with money in your pocket now. What also should be noted is that you shouldn't settle for the first investor that likes your idea just because they like it. Make sure you get the deal you want and one that's fair. If it's a large deal, you probably want to have a business expert meet with your lawyer when reviewing the documents as well as meet with you prior to negotiating with the investor. Once again though, the key is that the business expert be hired by you.