# Setting up a 3 WAY New Business



## buck-egit (Aug 19, 2008)

Ok a quick rundown 

My Brother came accross a product back in Feb and shorten the story
My Brother, Me and a friend from the States are setting up a company as we have got the Sole import rights for the whole of the UK & Ire. 

Now My brother isn't putting any money into the company as he will be doing all the Legwork and Myself and Matt who are putting in the money are sitting back as we both have day jobs. We are putting £3000 each into it.

We are trying to bang out a way to set up the company. 

My bro wanted to set it up with Me and Matt ( other money investor) to get 28% each and my bro would take 44% But I don't like this Idea as he would have a majority share in the company 

I would prefer a 1/3 split between us all and then a bonus scheme worked out on NET profits

Matt has suggested similar to me 1/3 splits but work the bonus out on GROSS sales as it is easier to work out

As I have said Matt says GROSS is easier to work out but I think if it was based on NET profit it would Make My bro control costs and expenses more and maximise profits which for him would gain him more bonus, If you get my drift

I know this is a very short synopsis of our whole plan but it is the bare bones So I can get an idea of what you guys out there would do or suggest...

Maybe You Guys can think of a better way of doing it ... let me know ???

TIA


----------



## Spoony (May 28, 2007)

Not sure, but to be honest. The investors hold the power as without the money there is no business in the first place so it's a bit harsh that he wants twice the share in the company.

Yes he's doing legwork but surely a third each is fine no?

Also I'd probably work on net too but then its six and half a dozen.


----------



## Buck (Jan 16, 2008)

Why arent you and Matt taking 50% each with your brother paid a salary and a bonus as you mention 

If he then delivers x targets by the end of year one he can buy himself in as a third (33%) share for the £3,000 that you both did?


----------



## 123stevevw (May 19, 2008)

Buck said:


> Why arent you and Matt taking 50% each with your brother paid a salary and a bonus as you mention
> 
> If he then delivers x targets by the end of year one he can buy himself in as a third (33%) share for the £3,000 that you both did?


Seems logical to me


----------



## The Cueball (Feb 8, 2007)

don't do any bonus on anything gross!!!

how do you even know you have made money, or have the cash to pay them out...

if it was me, I would go ahead as above, and maybe even give him a share in the business with each year... 

I don't see any reason for him to owe the business with no money down, he has got nothing to lose.... 

:thumb:


----------



## buck-egit (Aug 19, 2008)

Yes thats why I would prefer the Net Profit way 

For instance We could buy a product for £200 "cost"

It could be sold for £200 and we would make Zero money on it but we would have to pay out a bonus .. it doesn't seem logical to go the Gross payout road..???

At the End of the day He is My brother and if he didn't see this product back in Feb then I wouldn't have the opportunity to invest in it. I am happy with the 1/3 each as I don't have the time to do any sales as I have a full time job..I reckon between 2-5% on Net profits would be ok..

To give a bit more info we are buying the product for £18.50 and he is thinking on selling it for £25 to the Retailer and the RRP on it is £39.99. Now that price would be on a Min order of 10 units obviously we would have to drop the price for higher volumes. We have contacted the likes of Argos, JJb, QVC etc etc.
Does anyone with Sales experience think we are selling it too cheap to the retailer????? or are we bang on. The reason for all the questions is I am no businessman and neither is My brother so this is gona be a steep learning curve...LOL


----------



## The Cueball (Feb 8, 2007)

buck-egit said:


> Yes thats why I would prefer the Net Profit way
> 
> For instance We could buy a product for £200 "cost"
> 
> It could be sold for £200 and we would make Zero money on it but we would have to pay out a bonus .. it doesn't seem logical to go the Gross payout road..???


I've seen it plenty of times before.... its a load of BS... but even big business gets caught out sometimes....

in my companies, there has to be guidelines before any bonus is even thought about:

a) company has to make a profit
b) cash-flow has to be positive
c) employee KPIs have to be met

:thumb:


----------



## RP84 (Sep 3, 2007)

Tricky one this..

a bit like dragons den...

your brother found the product, i assume hes done a business plan which has made you and your mate interested in the product.

So i understand where hes coming from wanting a bigger percentage.

however its slightly different as no trading has even begun so you dont even know if theres any money to be made. 

maybe you could do this.. 
year 1 and 2, all 3 have same cut. no bonus
year 3. Providing the company has made a good profit and your brother has worked his ass of then you and your mate could slightly drop your percentages, 

if that makes sense..


----------



## buck-egit (Aug 19, 2008)

RP84 said:


> Tricky one this..
> 
> a bit like dragons den...
> 
> ...


Yes he did do a Biz plan he has been a manager of Bars over the years so he has some experience in Business

The thing about the likes of Dragons Den is most of the people that are wanting investment have spent all their life savings and maybe Mortgaged the house so you can understand them wanting the Lions share of the %... in our case My brother hasn't put in any money at all.

I edited post 6 with some figures ^^^^


----------



## rizo (Jul 14, 2012)

theres not a huge margin of profit if your paying 18.50 and selling for 25 or reducing on larger orders. £6.50 each, how many are you planning to sell in year 1?


----------



## buck-egit (Aug 19, 2008)

rizo said:


> theres not a huge margin of profit if your paying 18.50 and selling for 25 or reducing on larger orders. £6.50 each, how many are you planning to sell in year 1?


Thousands hopefully.. i.e Argos have 700 Stores in the UK. if they take 10 units per store thats just one shop there are loads of others We are setting the min order of 10..

Thats why I threw up the costs because I was wondering if anyone on here has experience in this kind of buying and selling a product. Are we selling it too cheap to the retailer???

What would the general rule of thumb be percentage wise.. if we are buying for 18.50 and the RRp is 39.99 is 25 too cheap ????


----------



## The Cueball (Feb 8, 2007)

for me, and simple import and selling, I look for 50% profit....

but it really depends on what it is, and the market etc.... sometimes it's as low as 30%

are these fully loaded costs, I.e. does it include your import fees and logistics etc!?!?

what are your other business costs!?!?

what kind of margins and sales do they NEED in order to just break even!?!?

:thumb:

<edit> I'm not expecting you to put everything up in public... just giving you some ideas to think about  <edit>


----------



## buck-egit (Aug 19, 2008)

The Cueball said:


> for me, and simple import and selling, I look for 50% profit....
> 
> but it really depends on what it is, and the market etc.... sometimes it's as low as 30%
> 
> ...


Yes it covers the import etc as they are coming from OZ. Our main cost will be running a Car and all the associated costs maybe the odd flight to the UK. And misc office costs and we are setting maybe 20 of the units asside for demoing to large companies. LMAO we are total NOOBS at all this ...

Thanks for your interest...its a golfing product what Margin would a Retailer usually look for if the RRP is 39.99 do you feel we could move the price we sell at higher.. so we make £10 per unit ???


----------



## rizo (Jul 14, 2012)

the profit you need to make you have to take everything into account.

have you looked into insurance? any large retailer would require that you have public liability and products liability usually they request a £5m limit, also as this is a new venture this won't cheap. if you think you could sell 10,000 in a year your turn over will be 250k your insurance will be rated on that.

are you directly shipping them to the retailers or are you holding stock? and shipping as and when? have you looked into cargo insurance? also as you are importing them you need to ensure your goods are covered for invoice value and freight costs just in case something goes wrong.

also in regard to insurance if your supplier was to have a loss and resulted in them not being able to meet you supply demands is there another supplier you can get them from? or would you be looking at covering this loss until your supplier is back up and running?

also as you are going to me a limited company you are required to have employers liability insurance.


----------



## Azonto (Jul 22, 2012)

My two pence worth would be not to get greedy. If selling at £6.50 profit on each makes 1000 sales and selling at £10 profit on each is too steep for retailers for what they think the product is worth, and they only take 300...

Bare in mind when you go and meet the buyers for the retailers, they will look to negotiate first on the product and then again for bulk discount so make sure you allow for this in your margins.

I think to begin with, you will find it quite trial and error and learn as you go but with 3 of you, this should greatly reduce the chance of mistakes!


----------



## buck-egit (Aug 19, 2008)

Thanks for all the ideas guys you have given me food for thought....

Keep it coming...


----------

