Raising Finance

[davidgill]

Dear all
 
We are a new publishing company launching later in the year, the company directors have over 20 years experince in niche business magazines and plan to continue this in the new venture.
The start up and first year running costs are £100,00 £40,000 has been raised allready a further £20,000 will be raised through private investment with the remainder coming from the bank.
We have two private investors both keen to invest £10,000 each, our problem is knowing what level of return to offer them?
The projected profits are Yr1 brek even /Yr2 £180,000/Yr3 210,000 and 5% growth from then onwards.
We are considering offering each investor a 4% stake in the business for the first 3 years which would give around a 71% total profit on the investmment, does this sound in the right ball park?
Any suggestions greatfully recieved, we obviously do not want to go in either too high or too low
Many Thanks
DG

[Business Brian]

Hi davidgill, and welcome to business-talk.
 
 I have to admit, this is beyond my personal area of expertise - hopefully someone else can offer a more experienced reply.

[EquusBusinessFinance]

The investors are very unlikely to make 71%. They might make 300%, 20,000%, 80%, 30%, 0%. It's very unusual for a business to make exactly the income shown in the business, incur the same costs shown in the business plan, or achieve exactly the profits shown in the business plan.
 
You mention a 71% profit on investment - that only occurs in your projections. Once the business starts, the projections go out of the window, and real-life results occur.
 
You have to balance risk and reward.
 
There are no hard and fast rules for this. You just have to come up with something that both the company and the investors are happy with.

[davidgill]

The investors are very unlikely to make 71%. They might make 300%, 20,000%, 80%, 30%, 0%. It's very unusual for a business to make exactly the income shown in the business, incur the same costs shown in the business plan, or achieve exactly the profits shown in the business plan.
 
You mention a 71% profit on investment - that only occurs in your projections. Once the business starts, the projections go out of the window, and real-life results occur.
 
You have to balance risk and reward.
 
There are no hard and fast rules for this. You just have to come up with something that both the company and the investors are happy with.