Hi, I am currently running my cake business from my home (licensed and inspected). I have been thinking of opening a storefront location because I'm running out of space in my home kitchen. I was recently contacted by a client, she said she would be willing to invest in my business as a silent partner if I decided to expand. Is this a good or bad idea? What would you do? I know that getting loans from banks for small businesses can be difficult. Thank you for any advice or opinions.
AIt depends. How much can she invest on an upfront and/or ongoing basis? What type of compensation is she asking for? How much will it cost (upfront and additional annual costs) to create a storefront? Does your business plan support expanding into a storefront? Who will you be competing against, and do you have competitive advantages? Who will staff the storefront? Are you ready to expand? Do you want to expand?
Hmm, this is an interesting topic. I have someone who wants to be a silent partner and he keeps asking me if I have considered it. Jason brings up interesting points.
Jason, is upfront better? Or continuously based on sales and your business plan?
Jason- All of those details haven't been discussed yet. I wish I had more information. I just wanted general opinions on the subject. I, personally, don't have a good feeling about it because I hate the thought of sharing my business with someone else. I feel that I'm ready for a storefront. I've tried products from places in this area and I am not impressed at all. Honestly, I'm disappointed that people spend their hard earned money on some of the stuff that's being sold. I really appreciate you taking the time comment on my post. I know a lot of CC members value your opinion, I'm included :)
AIf you have a choice getting all the money upfront is preferable, but if the investor has constraints based on their own finances and/or the performance of the business you need to look at cash flow requirements going forward (including staffing), and compare that with the income of your current business and the expected future state including the storefront.
The key thing is making sure what you are getting matches up with what you are giving away, in the form of promised future payments, a percentage of gross or net income, and/or company equity.
I haven't seriously considered having a partner, but your advice does give me some guidance. I'd also hate to partner up with someone and the terms in the end don't benefit us both.
I wish we could "like" responses. Can we get a button?