Need advice on a 55k investment

Discussion in 'Growing and Managing a Business' started by euzio.com, Oct 13, 2010.

  1. euzio.com

    euzio.com
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    I'm new here and I'm young. The money I am going to be investing with is entirely my own. I know I will get some questions regarding how I made my money I'd just like to say that it was made through a couple small businesses I am running.

    The business I want to start is a kitchen renovation business specializing in custom cabinetry. I live in the states, but this business will physically operate in a South American country. I am incapable of staying in South America and looking after this business, as a result I will leave the business in the hands of a trusted craftsmen who will be in charge of making sure all the orders are made to standard. I will have a 100% ownership in this business as I will be the sole investor, profits will be split 65%/35% over the first year or until I make my investment back. I will be receiving the 65%. Once I get a return on my investment profits will be split 50/50. The craftsmen and I have agreed on the above terms, I need advice on whether or not the above seems like a good idea from a return on my investment viewpoint, I am not in need of help on how to execute the business or how to source materials, workers, and good locations; I am fine in that area. I'd also need to know the risks of not being involved in the business since I will not be there. The business partner has been in my family for 15+ years and we are very confident in the quality of his work, I will visit this country every 6 months to check up on how things are going and I will regularly speak with relatives and my business partner. I will set up a bank account in this country with online banking to monitor profits. Would it be a safe bet to set up security cameras at these workplaces or would it be considered a negative sign of trust. I know this is a lot to ask for especially for being a newb on this forum; but I'd like to know what I'm getting into. I am especially seeking guidance from investors that are in similar situations, but not limited to the same line of business.

    Thank you in advance.
     
  2. Fergal

    Fergal
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    Welcome to our business forum euzio.com. An important first step would be to evaluate the market for the business in the country concerned. Kitchen companies are doing very poorly in Ireland at the moment, due to the recession and the decline in the construction industry. Obviously every market is different and you will want to analyse the market you are moving into.

    Do you plan on writing a business plan for the business? If you do, you should find the links in the Business Plan templates section of our Useful Business Resources / Links thread very helpful.

    You will most probably get a greater buy in and commitment from the person running the business, if they own even a small share of it. Would it be possible for them to buy 5 - 10% of it? If they don't have the funds now, perhaps they could accumulate the share, in return for receiving a lower salary for the first year or two.

    Nowadays many businesses have CCTV cameras in the workplace and this would be a good way for you to keep an eye on what's going on, on the ground, especially if you set it up so that you can access the CCTV footage live over the Internet. Some jurisdictions require that you inform staff if they are going to be monitored in this way, so this is something you might want to look into.

    Some countries have strict regulations and or prohibitive taxes for taking money out of their countries. You should check what the legal implications are, concerning taking profits from the South American country concerned.

    It sounds like an exciting and interesting opportunity for you. Good luck with it and please do reply back with your thoughts.
     
  3. euzio.com

    euzio.com
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    There was no conflict with me being 100% owner, the craftsmen just wants his cut in profit.
     
  4. Fergal

    Fergal
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    When looking at potential investments, investors have three main areas of concerns;

    • How much investment is required from them?
    • How will that investment be used?
    • How will their investment be repaid to them?

    Do you have clear answers to those three questions euzio.com?
     
  5. euzio.com

    euzio.com
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    My partner is not a financial investor, it is all my money, my partner is simply investing his time into the business and his 25 years of experience being a craftsmen across many fields. He is only looking to share the profits 50/50 after I make my investment back.
     
  6. Fergal

    Fergal
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    Sorry for the confusion euzio.com. I wasn't suggesting that you ask your partner those questions. But can you answer those three questions for yourself, i.e.

    1. How much will you invest in the business?
    2. How exactly will that investment be spent in the business?
    3. How and when will the investment be repaid back to you?
     
  7. royal383

    royal383
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    Hi

    I am SR.executive in some Mutual fund company

    According to me don't invest in Lump sum Invest it Through SIP
     
  8. GekiDan

    GekiDan
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    Can you tell us the advantage of doing so, so that the OP will be enlightened on your suggestion.
     
  9. Dayanan

    Dayanan
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    Setting up cameras will only show if the craftsmen are working or not. It will not tell you how much he paid for the supplies that he purchases for the business.

    Who will be the signatory on the bank account?
    Who will make sure that government requirements on taxes, withholding taxes and social charges of employees will be paid regularly? Same for monthly tax returns if any?

    In the end trust is all you have as visiting once every 6 months will not give you the full picture.
     
  10. euzio.com

    euzio.com
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    When setting up the business, I will go around making bulk, but not excessive purchases of the items. As for taxes, there are little to no taxes charged in the country where I want to make business, and when there are they are not much. A relative of mine will be in charge of the finances.

    1. Between 40 and 55k
    2. My initial investment would consist of 6 months to a year rent at a prime location, which would be very costly, a month of rent for the space I need that would allow me to set up an exposition displaying the kitchen cabinets would cost me between 1500 and 2500 a month. Hiring 1 to 2 employees that will deal with customers and show them catalogs to help them have an idea of what they want wouldn't be too costly as an "average" salary in this country is between 500 to 900 a month, I could come up with incentives for the employees to produce sales with a commission type system. I am sure electric bills shouldn't be too much, but it isn't something I should overlook. Taxes are not usually based on a sales percentage, they are a standard fee which is very low. With regards to what taxes have to be payed I will have to look into that. Let me remind you guys that this business will be in a South American country. Taxes are very low sums if and when they are actually enforced. Cost of materials such as wood, paint, and metals will also be an initial cost. As I will personally go about purchasing the required items, to have an idea of the profits I should be expecting. I also understand that prices of raw materials fluctuate.

    3. After everything has been planned and payed for, profits will be split 65/35 between me and the one person who will be putting together the cabinets. The building of the cabinets will occur at a separate location which I own. I will be receiving 65 percent for the first year or until I make my investment back, after this period profits will be split 50/50. I'd like to remind you guys that all the costs listed above are taken into account before profits are split.
     
    #10 euzio.com, Oct 23, 2010
    Last edited by a moderator: Oct 24, 2010
  11. Justin

    Justin
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    Sounds Interesting.

    I live in South America in Northern Peru and love it here.

    I find it odd that you trust your business partner and he has been in your family for 15 years and yet you want to have CCTV watching him work. I suspect he may take that as being distrusted and may have a negative impact on his work. You could talk to him about it and ask his opinion on whether it is necessary for your joint "employees".

    I would also argue that it would be quite expensive to install and maintain and indeed to monitor from several thousand miles away.

    Are you guaranteeing him a salary, or just his cut of the profits?

    I would also warn that taxes are much higher for expats taking money out of the country so you may want to investigate that in more detail.

    I would also make sure you have a business plan written even if just an outline and that your partner/family member fully understands it and what is expected of him.

    The people here are wonderful and I really have no huge desire to ever live in England again, but there is sometimes an element of manana about the place. For example my intercom was meant to be replaced last Friday at 3pm. He turned up at about 6pm, installed a new handset and promised to be back on Monday to install the downstairs call button. It is now Saturday and he still hasn't come back, despite promising to do so a few times. So he is down the cost of the handset and we are still having to traipse up and down the stairs every time we need something or friends come to visit etc.

    Ah well, manana will soon be here!
     
  12. James00

    James00
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    Welcome dear as you are yound so you can take risk and you can also learn from your mistakes.Try to learn from others mistakes too.Wish you all the best.
     
  13. euzio.com

    euzio.com
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    This is my fault for not specifying this, but the only people under the cctv supervision would be the employees in charge of the "expo" type location. I just want to see that they are appropriately attending the customers.

    I would not have security cameras on my business partner while he is working and putting together the cabinets, he will be working at a separate location which I own, as I have trust in him and his ability.

    As for how he will be payed, profits will be split 50/50 as it is solely my initial investment and his skill level in play.

    With regards to high taxes on taking the money out of the country, there will be no problem as I do not plan on taking the money out of the country but re invest it in real estate. You can't have all your eggs in one basket.

    I have a clear plan of what I want to do, I just need to make sure it gets executed the right way.

    As for your side story I have no comment.
     
  14. Felix07Richerd

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    Thats really huge thread with huge information about investment, please keep it up.
     

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