Re: Profit split suggestions

"Tony" <[EMAIL PROTECTED]> wrote in message
news:[EMAIL PROTECTED]
>
> Need suggestions on how to fairly split profits with investors.
>
> I am considering starting a marketing consulting business, using a
proprietary
> business model. The owners of the model are charging USD$40,000 as a ".
---snip---

The formula is really quite simple. So simple, in fact, that most people
will not see it because they will be looking for something else. Here it is:

First, you must visualize the company as you expect it to be in, say five
years. You must see the cash flow from a throughput point of view and not an
accountant's point of view. Accountants rig for taxes. Throughput is the
visual aid for managing the business. Throughput defined is "what is left
over from sales after paying for materials" and does not include labor nor
overhead. Think of a merchant who buys a case of apples for $10 and at the
end of the day he reaches into his pocket and has $22. His throughput is
$12.

Next, you see yourself putting in all the time and effort to build your
business. Your partners have put in the cash to buy the franchise and some
of the material you will be selling, one way or other.

Now, draw a circle and put a line through the equator. Say the circle is
worth one million dollars. Assign one share of imaginary stock per dollar.
Set aside 50% for future use as collateral and to grow the business. Divide
the bottom half in two. The bottom right quarter million will be for
investors. The left bottom quarter will be for you and for others who will
buy their shares by contributing talent such as accountants, sales, design,
IP, IT, art, graphics, etc. You give yourself an immediate 5% of the
business because it is your idea. You then gain shares by billing your
company at the going consulting rate - no more, no less. For each hour you
put into the business you will issue yourself X number of shares. You issue
imaginary shares to your benefactors in direct proportion to their
contribution. If they put in a quarter million, then they get a quarter
million shares.

At year's end you divvy up the profits: 50% stays in the company for growth,
25% to your investors and the remaining divided among your team who have
also billed the company for consulting and instead of cash they get stock.

When you actually start making a profit, go ahead and incorporate in
Delaware or Nevada and issue the real shares. Remember that capitalism is
based on trust. There is never a guaranty that the investor will recover
their investment. An investment is not a loan - it is given freely based on
the person to person relationship and trust.

Wayne
see my son's innovative and exciting fun in the sun hobby at
www.rcsailcars.com