Investment Deals

[ashxo]

Hey there. Young blood here looking to start investing in a new bar a friend is opening. He has 5 successful bars currently in business as we speak. Since I'm new to the game and I'm awaiting the investment summary, I've started researching and coming up with questions prior to receiving the deal. Perhaps you seasoned vets can help the new kid out...

Is it typical that investment deals are the same for each investor in one bar? What I am saying is, if there are 2 guys investing 200k, 1 guy investing 15k and another investing 10k into New Bar X, will they all be given the same deal by the bar owner? Will the ROI deal be the same whether you are the guy who put in the 200k or the 15k? Is it standard to have one deal when dealing with everyone investing in one bar or do owners usually structure a different deal for each investor?

Is it wise to throw a small amount of money (15k) into the pot when you have heavier hitters throwing 200k into the pot because you know they will want higher ROIs and will be more determined to make sure the bar is profitable?

How does one become part owner opposed to just being an investor? What usually determines that distinction (other than amount of cash I suppose)?

Thanks in advance.

cheers,
xo

[scott1988]

Not to state the obvious but money is money just in different amounts. That being said, the larger investments would receive a larger return but only because they invested more. What I mean is that the (%) of return should "typically" be the same. Not always but should be.

So if guy 1 invests $15k and guy 2 invests $200k and the business as a whole nets $100k after all taxes and expenses are paid (and you have a ROI set up at 5% per $20k or whatever it is), the guy who invested $15k would get $3750 back and guy 2 would get $50,000 back. Because....guy 1 actually gets 3.75% of the net profit back based on the 5% figure at $20k (because they didn't actually invest $20k and only had $15k to put in) and guy 2 gets 50% of the net profit back (based on the fact that they really had 10 $20k shares which multiplied by 5% equals 50%). Make sense?

The main thing is that the profit of ROI has to be a percentage of what you put in. Now, that doesn't include your ability to have much say if the corporation or entity is set up so that if you own less than "x" percentage of the company or less than let's say 10%, you don't get to make many decisions. At least that's what will happen like it or not. And it only makes sense to. If I'm willing to invest a quarter mil into a place that has a total investment of 2 or 3 mil, I want my voice heard much more loudly than someone putting in $10k or $20k right? But the profit percentage money wise should be the same with respect to the amount put in. At least that's the way I would assume you were thinking it should be done.

Of course every deal is different and you do have to work out ANY AND ALL of the details dependant on each individual business.

Oh yeah, use the search button on the forum too. It has a lot of investment questions that I'm sure you'll have already discussed and probably answered. Just do some reading.