Share Capital Advice and Opinion Wanted Please

[Sirfen]

HI First time poster here!

I am presently starting up a furniture manufacturing company. I begin manufacturing in March 2013. I have 25+ years of experience in the industry.

I am looking for investment and currently have a seriously interested party. My query is about what level share capital or equity would be reasonable and fair to offer. The current discussions and terms (loosely) are as follows ……..

The Business Plan forecasts net profit of 10k in Y1, 30k in Y2 and 100k in Y3.

I will have full control of operations of the company. It may be that over time the investor is introduced as a director but not to start with.

We will reinvest profit back into the company to enable the company to grow.

Machinery will be funded short term.

We will not take dividends for the 1st 2 years. When we do it will be 33%/66% split.

We have yet to discuss exit strategy nor do I think we will at this stage. I/we foresee the relationship as being long term.

We are both thinking that a 30k investment for 33% equity ‘feels’ about right. This 30k will give the cushion required to have no cash flow issues to begin with, following start-up costs of approx. 10k funded by myself.

The investor is the owner of a another company that will buy from my company; therefore I am potentially in a win win situation. It is in his interest to ensure he buys from me (and pays quickly) to see the company prosper. He also has a vast network of contacts within the industry that he can market the company with. I too have very good connections.

Orders for the work will be forthcoming as soon as we are ready to manufacture.

Having no experience in the share capital ‘game’ I am looking for advice and opinion as to what others think about my proposal for investment and the in particular the 33%.

Thanks in advance.

 

[Innovation]

I think you have it spot on - equity a little high to give away - but if you are happy then thats all that counts - like you say a win win situation - good luck sounds good

 

[Sirfen]

Thanks for the reply. That's my feeling to, the equity being a little high but the situation is somewhat unique and I think and an opportunity to be grabbed and held onto.

The 30k isn't really the attractiveness of the investment tbh. Its the contact, input etc. and the 'win win' I describe that makes it feel good.

The investor is willing to scale the investment meaning that should we agree on only 10k his share capital may be as low as 15% for example. The 30k though is a big soft cushion

 

[Innovation]

It is spot on really is - I like the model , you can not lose my friend and is an opportunity to be grabbed and held on to - what furniture are you producing ( I use to do furniture craft ) more of a hobby then for a living , And yes a professional tradesman , turned product designer and innovation - creating concepts to help tradesmen beat the recession - I hope all work's out for you, but guess that goes without saying - as a nice model you have - well done

 

[Sirfen]

Ill be manufacturing retail fittings alongside high end residential furniture and eventually leading to hotel room contract furniture if things pan out