8
Jan
2010
Use good credit to boost your profits
Almost every inventor who is operating on limited funds has had that “Aha” moment when they think, “I’ll just tell someone my idea and they will see how terrific it is and want to give me money to develop it.” If you are lucky enough to find someone who shares your enthusiasm for your product to the degree that he wants to invest his money in it, you should negotiate your arrangement with him in a professional manner. You will need to have a written contract that clearly delineates what he is giving you and what he is getting in return. Is he sharing in gross profits or net profits?
How do you determine what those are to everyone’s satisfaction? Will he have part ownership in your business or company? If so, how much? How much is too much? Will he have a percentage of your company or shares of company stock? How do you determine what is a fair percentage to give him in exchange for his financial investment? How much input will he have in the decision-making process of your company? Are you required to pay back his investment in addition to sharing profits? Does he understand the risks involved; that he may earn money on his investment or he may lose all of it? What happens in that case? Are you required to pay him back if that should happen?
If you are getting an investor it is a good idea to get a legal contract drawn up by an attorney to reduce the likelihood of misunderstandings down the line. This is true whether your investor is family, a friend, or merely a business acquaintance.