re: New Business Startup Question

quote:

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I get that but would you give up half of profits for 5 years plus the EBITDA after five years? And how is that exactly determined? 1/2 of year 5 profits plus half every year? I'd be slowrolling my profits in that situation.

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It depends upon what this "advice" looks like.

Some deals it's not uncommon to have a "money guy" silent partner and the "work guy".

He's not going to likely make much if any profit in the first couple of years, so half of nothing isn't too big of a price.

Sounds like most of his startup costs are fixed assets which would qualify for 100 percent first year depreciation. I would consider setting up the deal to give the money guy a large share of the losses in the first year or two. There's value to the money guy in those losses.

Yes, clearly you need a better definition on that buyout. Put a stipulation in there that says anytime after 5 years, the money guy can be bought out for the valuation of his 50 percent interest as determined by a business valuation expert. Him and the partner each hire one (both paid for by the business or by the OP) and if they disagree, split the difference.