First off I want to apologize if my question seems amateurish, I really don't know anything about investments and shares.

I have a business I want to start, and I sent the plan to some few people, and they are all interested. The problem is that I asked for more like a loan, where I'll repay back in interest within a period of time, and they all refused, but instead want a lifetime offer. That is like to be share holders or so. I have no problem with this, but I do not know how to split the potential profits to be made based on how much they each help with.

Would it be okay to say they receive 1% of 50% profit for every 100k they contribute (the other 50% profit being mine obviously)... i.e if someone contributes 10M, he/she gets 100% of the 50% profit (therefore meaning we share profit equally 50/50)? Is this an okay proposal to give to a potential investor that's doing nothing but supplying funds?

How do I go about making the proposal?

The start up has different stages I've shown them.

The most minimal start level - which requires 1M to start, and I have 500k (This is all I have exactly to start)
The median level - which requires 5M to start, and
The main/ideal start level - which requires 7M to start.

I broke it down because I believe in starting small, no matter what, but unfortunately the amount I have is still not enough of the most minimal required capital, so I turned to help, how would you fellow NLers suggest I attract the willing investors I have to either help with the half needed to start small or any amount they can help with, despite the little I have?

You can share it as a proportion to the entire capital. meaning if they contribute 200k then you do 200k/1m. that would be the % of profit sharing for the person.

zodo2rule:
You can share it as a proportion to the entire capital. meaning if they contribute 200k then you do 200k/1m. that would be the % of profit sharing for the person.

Meaning 0.2% of profit??

D4V1DD4:


Meaning 0.2% of profit??

Yes. At least you have your 50%.

It will help you to start by differentiating owners/investors and key workers (you being one of them as you will be responsible to daily operations). Since you are also bringing capital each investor gets a dividend in ratio of funds invested. The investors all sit and agree on the remuneration/compensation of the key executives (including yourself) bearing in mind that financial and operational targets must be met.

zodo2rule:


Yes. At least you have your 50%.

Okay. It just seems really small. so if the person should provide the entire 1M/1M. they get just 1% of profits monthly. Putting myself in the investors shoe, I would feel that profit is low. But if this is how investments/shares are done, then I'll follow this.

D4V1DD4:


Okay. It just seems really small. so if the person should provide the entire 1M/1M. they get just 1% of profits monthly. Putting myself in the investors shoe, I would feel that profit is low. But if this is how investments/shares are done, then I'll follow this.

It's only one of the various ways to repay investors. however there are other ways maybe like salary payments etc. however salary would involve cash flow both when you make profit or and when you do not. but in my view this method of sharing profit/loss as a % of contribution is better as when there is loss it is also shared in that proportion. meaning when there is no money then there would be no salary to pay. Also this method depends on agreement with the investors because you would have to decide how much of the profit you would retain in the business and how much you would be willing to share e.g. if you make N100 and you decide that as a policy only 80% of profits made would be shared among investors, then you put it to them hence the other 20% would be retained in the business for growth and operations.

I hope this helps though. Best of luck in the business.

zodo2rule:


It's only one of the various ways to repay investors. however there are other ways maybe like salary payments etc. however salary would involve cash flow both when you make profit or and when you do not. but in my view this method of sharing profit/loss as a % of contribution is better as when there is loss it is also shared in that proportion. meaning when there is no money then there would be no salary to pay. Also this method depends on agreement with the investors because you would have to decide how much of the profit you would retain in the business and how much you would be willing to share e.g. if you make N100 and you decide that as a policy only 80% of profits made would be shared among investors, then you put it to them hence the other 20% would be retained in the business for growth and operations.

I hope this helps though. Best of luck in the business.

Yes it helps very well. Actually just 20% of what the company makes is profit. the 80% goes back into staff salaries, re-marketing, maintenance, etc. so basically, it's 10% I plan to share among investors. Thank you very much for your advice.