I need money!

I have a wonderful business idea that is worth more than 40 million naira on paper, but currently worth nothing in reality, and to transform this ingenious business idea into a real business I need 10 million naira. My projected income is approximately 10 million naira monthly, if only I can secure the funding I need. But then an investor is ready to offer me 10 million naira is exchange of 80% equity in this business. Meaning that he will own 80% of my business. He will have 80% control, and he will do 80% of the work! No way, it’s an ugly rip off. I can’t offer anything more than 30%…no way!

I don’t care if he’s bringing his expertise. I don’t care if he’s brought 100% of what we’ll use in starting this business. I don’t care if he’s putting in 80% of the work required to make this business manifest. I don’t care if the business is currently worth NOTHING. I don’t care if he’s taking a 100% RISK with 100% of his money, investing in a yet-to-exist business. I don’t care!

I think the problem is that I think and believe my business is worth the figures I’ve put down on paper. I see the profit, but I don’t see the risk, and I don’t see the obvious: it’s not even a business yet. Yes, right…why should I give an investor 80% of my business, even if he’s taking 100% of the risk? So if I make 10 million naira monthly, automatically, I’ve given him 8 million naira monthly. That’s not fair! I can’t accept that! But what have I forgotten? I don’t even have a business! I need his 10 million naira to make the business happen, or the business will just die like one of my previous business ideas that met with a solid brick wall when it came to the issue of finance. Let’s look at it from a wise man’s angle. First of all, I’ll ask myself the following questions:

1.        How much am I currently making from the 100% ownership I have in the business? And if my answer is NOTHING…not a single farthing! Then, I’ll ask:

2.        How much will I make (independent of the investor’s money) within the next one year? And then again if my answer is between NOTHING and ABSOLUTELY NOTHING, then I’ll ask again:

3.        How much will the business be worth within the next one year with the investor’s money (N10, 000, 000)? And if my answer is that the growth rate of the business is about 100% ROI (Return-on-Investment) on the first month, 200% ROI in the second month, 300% ROI in the third month etc? And if from my calculations, I figure that somehow within the next 4 months, the business may be worth well over N40, 000, 000; then I’ll ask myself:

4.        What is 20% of N40, 000, 000? And if my answer is N8, 000, 000; then I’ll ask myself:

5.        What will the 100% of my business be worth within the next 4 months (or even 1 year) without the investor’s money? And if the figures in my answer say  NOTHING or anything less than N8, 000, 000; then I’ll ask myself:

6.        Is 20% of N40, 000, 000 WORTH more than 100% of NOTHING?

I’ve been thinking about this all day, because I have a business idea to pitch to an investor, and I need to be sure before I decide on how much control of my business is worth giving away for N10, 000, 000. If you’re pondering what I’m pondering, then we both need each other’s comments on this!

P.S: As you know, I’m not a financial expert, I’m just a humble den sweeper, and therefore I make no claims to the soundness of the business logic imbedded in the above reasoning!

–The Den Sweeper 

 **photo courtesy of www.flickr.com