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Old 20th January 2014, 06:02 PM   #1
CoachT
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Hello, I'm a 29 year old man and I coach competitive cheer. I have worked at a particular gym for 8 years and seen many ups and downs. We have recently opened a new facility and things are going great but could be so much better if the owner was here for day to day operations. I have expressed my feelings to a friend and they are willing to loan me money to buy into partnership at the gym. We meet Wednesday to talk about things but I need help to see if:
1. If it's a good idea?
2. What questions should I ask?
3. What do ask for?

If someone could please give me some insight it would be greatly appreciated.

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Old 21st January 2014, 01:44 AM   #2
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I would try to set guidelines for what is expected from each party and what roles each of you will be playing. If you feel not enough commitment is being made by the current owner, then it could be a sign that you will be doing any extra work on your own. I would also ask questions about the future development of the business and overall goals.

Verbal agreements are great to get the ball rolling but make sure there is a contract on how revenue will be divided. It would be unfortunate and quite a headache if things turned sour down the road, and all you had was a verbal agreement.

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Old 23rd January 2014, 09:26 AM   #3
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You should expect anywhere from 20% - 40% return on your investment into a business (depending on how risky the business model is).

For example, if you invest $100,000 into the gym, you should expect between 20,000 - 40,000 each year in return. (this is separate from what you will continue to get paid as an employee) This may seem high, but it is the standard for what small businesses yield, due to the higher risk. Also don't forget you'll have to pay interest on the money you borrow from your friend, so it's not all in your pocket.

With that number in mind, the next step is to find out if your 100,000 investment in the business would support the kind of ROI you are hoping for.

Let's say for example that the gym has sales volume of 500,000 per year, with a 10% net profit of 50,000 per year.

So the 2 questions on the table in this example would be:

1) For a 100,000 investment, how much of the profits is the current owner willing to give up?

2) Does your share of net profits the owner agrees to equal your goal of 20%-40% return on your investment each year?

Your answer to question number 2 will help you measure if its a good investment for you or not.

Hopefully its a start for you to ask the right questions.

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