Tue, 21 April 2020
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Many startups use profit sharing to fund their business.
It is important that everyone involved has a very clear understanding of how “profit” is calculated.
There are three locations in the startup’s profit and loss to dip in and take out a “share” to pay back an F&F investor. They are as follows:
To know how much profit to share, you must first build a financial model.
Another key issue is when to start payments to the investors.
You could set a timeframe such as 3 to 6 months out, or upon closing a customer sale
You could set a specific amount of revenue or profit or whenever you are able to payback.
There needs to be a limit to the amount of profit sharing. It could be a specific dollar amount or a time limit.
Direct download: Startup_Funding_Espresso_--_Profit_Sharing.mp3
Category: -- posted at: 11:52am CDT