Question

Jon,

I m unsure if you can provide any advice here, but I thought I would ask you.

A close friend has asked me to invest in his company. The business is doing well and never closed during the virus lock downs. So it seems like a sound investment. He is asking me to put up £10,000, and in return he will give me 25% of all profits for 5 years. I don’t know if I should do this or not and am confused as to how I would get my money back. Any thoughts you have are appreciated.

James

Answer

James,

Obviously the decision to invest in your friend’s company is yours, and any advice or direction I could give would require much more detail and information.

I would say firstly to get everything in writing, a legal contract.

I would also advise to seek legal advice, and review your friend’s books. He should have an accountant who can provide you with financials.

It may be a good investment, no one can say with the little details you provided.

You would need to look at the past few years net profits after all expenses and taxes, take 25% of this and project it for the five years and see if it exceeds your £10,000 investment. Then see by how much it exceeds the £10,000, to calculate a percentage of a return on your investment.

If that return is lower than a savings account or other safe and stable investment vehicle, then it may not be a very good investment. Again it is your choice and decision to make.

Regards,

|Jon

Leave a Reply

Your email address will not be published.