Allowing Family To Invest In Your Business?

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scottspfd82

scottspfd82

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Dec 29, 2006
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I made a post, probably a month ago, about quitting my job with $200 and some change to my name.

So far I guess I can't complain. But I'm going to anyways. A lot of what I've been doing since I quit my job involves building/flipping websites, and I really don't enjoy it all that much. The main thing I don't like about it is that unless I hire a designer, writers, and start my own web development company, my income is basically capped for the time being.

I'm still running PPC as well, but I run into the problem of spending too much before I get my checks. As of right now, I'm spending maybe $10-$20 a day at a 100% ROI or better. Nothing great, but it's something. And I still have money left over for bills.

I've got probably 10 campaigns paused that where profitable at one time, but I just don't have the extra cash to put into them right now. Making ~$100 a day doing web design just isn't enough for me to pay the bills and spend any serious money on PPC.

After almost a year of researching here, I now realize how to properly set up and test a PPC campaign. My only problem is cash flow.

My dad has money. A lot of money. But he's never been the type of guy to just give me money. I have to work for everything I make, and I thank him for it. After spending $100 or so in an hour, and totally pwning facebook, I decided that I need some funding.

So I called him up, and asked him if he'd be interested in investing in something if I can prove that it's profitable. We ended up going to lunch to talk about things.

At the house, I showed him my adspend on the major SE's, and my profits from various networks over the last couple of months. Then, to cap things off, I threw up a $5 flyer on facebook. Not 10 minutes later I was showing a $15 profit on a network. He was like "holy shit".

He plays the stock market, so seeing 300%+ ROI's across several campaigns really impressed him.

He told me to write up a plan as to what I'd do with the money, how much money I would need, and how much of a return he could expect. So he's definitely interested.

This is where it gets tough. Most of my profitable campaigns were set up with $5 budgets and I'd just let them go throughout the month, they'd bring in a slow but steady profit stream.

The most money I've earned with a single network in a month is $1k+.

We're talking about an investment from him of $5k-$10k here. So, I may be experienced with PPC, but not with this type of cash.

On the other hand, I feel that I'm experienced enough so that if I made my full time job running PPC campaigns, I could make use of that kind of money. I know how to test small and then go bigger, so I'd just do it on a larger scale.

I've got a few questions. First of all, there's the "Never do business with family rule". I don't think this applies here. Me and my dad have pretty much been in business together since I was a kid. I've worked for him for several years of my life. We both understand and take plenty of risks.

My real question is how to structure the whole deal. Promise him his money back plus a certain %? Give him a profit % for x amount of time? I know I need to talk to him about it, but he told me to write up a proposal for him. He wouldn't ask that if he wasn't serious, and I'm not real sure how these things usually work.

And the final question, does anyone think this is a bad idea? I'd use a loan or credit cards, but to be honest, I made some serious mistakes with my credit when I was younger that I haven't recovered from yet.

I'd just like some input on the whole idea.

Thanks.

-Scott
 


I don't recommend making a habit of doing business with family, but it's probably a good place to start. If it all blows up in your face, your father is likely to be more forgiving then some random investor.

$5-$10k can get a lot rolling. It's a good opportunity so you might as well take it. Plus, he's your father and it sounds like you two get along. He should want to see you succeed and should be willing to help you out along the way.
 
even tho he is your dad, get everything in writing including gaurantees and contingency plans so that if things turn south you'll both know where each stands.

if you can turn $1 into $2, and there's nothing in the biz model to prevent scaling you should be fine. AND, from the sounds of things 5-10k isn't a huge investment to your dad - its prolly just test money to him. ;-)

good luck!
 
He told me to write up a plan as to what I'd do with the money, how much money I would need, and how much of a return he could expect.
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Why don't you ask him if he'd loan you $10K for a year at a reasonable interest rate, say 10%? That's really the only way you can guarantee him any rate of return and it's better than what he'll get at a bank.

Even his stock broker has to tell him investing has inherent risks and there are no guarantees. Past performance is no guarantee of future profits.

That will keep you from "going into business" with him and it'll put a "drop-dead" date on the deal. At the end of a year, or sooner, you'll have to give him $11K.

Search G for a sample promisory note you can download and sign that for him, guaranteeing him his money back, plus interest, on or before a certain date.

You can even promise him you won't use the money for anything else, if he so desires. He's already seen what you can do, so unless he's just going to turn greedy for a larger cut, he ought to agree.

If he does go greedy, show someone else what you showed him and you'll soon find someone who'll loan you the cash. Hell, if I knew you and you showed me that, I'd give ya $10K at 10% for a year.
 
10,000 at 10% over a year is damn good for him and considering your circumstances, it should work out well for you. It seems like you're worried that your 300% return at a $5.00 investment won't scale out as easy as the numbers project. This is probably true, but even if that drops 180%, you're still going to be able to pay him back and still make a profit.

I did something similar with my father and I spent all the money and was still getting the returns. I would probably not be working right now, but my offline business went in the shitter so I had to file bankruptcy and I have to live like a bum til it's over so I won't have to be paying off the debt for the rest of my life.
 
Thanks for the awesome advice guys.
This forum is turning into Dear Abby.
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Ahh, come on. I've asked for advice here on numerous occasions, from dating to business, and have never been let down. Is this really that terrible of a question to ask here? If it is, let me know, don't worry, you won't hurt my feelings.

As for everyone else, I appreciate knowing I'm not the only one who's been here before.
 
Ah, I was just giving you a hard time. It's actually a nice break from all the geek speak and tits & ass. :D
 
I kinda had to do the same thing because I'm very much underage. It all started with free advertising and craigslist spamming before I had enough money and trust from my dad to start up those miracle ppc campaigns. I say: take maybe 2k from your dad and work with that before you start taking large amounts.
 
My 2 cents, go for it. I think that family rule is for extended family. Your mom and your dad are still going to love you no matter how much you fuck things up. (not that you will ;) ) I went through a bad time a few years back and my parents bailed me out with no strings attached. Of course I paid them back as fast as I could because I didn't want to be indebted to them, but they would have let it go and not have ever mentioned it again.

I don't know what your relationship with your dad is, but even if it ever does get tense, it won't last forever, because they are your parents and they will love you forever no matter.... etc
 
never mix money matters with family and friends. just picture yourself having to collect money from a friend or a family member who cant pay back right now and the onus that puts on them and you.
 
I would not do it. Keep track of your earnings (TIGHT TRACK) reinvest and grow slowly.
If you really want to go for it, try what springer suggested and take a loan with a good interest rate (for him).

Family and money don't mix. Only thing worse is friends and business.
::emp::
 
emp said:
Family and money don't mix. Only thing worse is friends and business.
::emp::
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emp is pretty much right. I have a former business partner who remains one of my best friends. We sold the business, it did not fail. Generally, people are amazed when they discover we were business partners and are still friends. Apparently, many folks share the above opinion.

I've borrowed money from family and friends (only a few times) and have ALWAYS given them a promisory note. It was always a business deal and they always got paid back, on time and in full.

Over the course of my long and storied life, I have been friends with a few bank presidents and vice presidents. I have borrowed money from their banks and every single time, they have made me go through all the same red tape as any schmuck off the street. I expected no less. The loan has always been strictly a business relationship.

That, my friend, is how real business is done... with family, friends, or otherwise.

Good luck, I hope you get the funding you need.
 
emp said:
Family and money don't mix. Only thing worse is friends and business.
::emp::
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From what I've gathered is his dad owns a business (piano store?) and Scott has worked for him in the past. They have already mixed "money and family" so this wouldn't be any different.

I say go for it but take it slow and don't borrow too much at first to make sure you can scale it. Your dad should probably be getting at least 15% since that is what he could likely make in the stock market.
 
do you have any credit at all? I would get money from credit cards first before borrowing from family. if you have any credit at all, just apply to every card offer you can find in a day.
 
Ehh, I wish this thread would just die. Anyway, Pocketrockets is right. I've worked for my dad before. I've had him invest in projects in the past. I've invested with him in projects, so him being "family" isn't that big of a deal. If I manage to mess things up and lose his money, he realizes he's taking a risk. I've also shown him past performance of various campaigns that I have running, so he has a good idea of the rewards involved as well.

We've already come to an agreement on the deal. We're going to set up a separate business entity and everything that I work on involving his cash will go through those accounts. We've also agreed on budgeting, reporting, profit shares, and we have an exit strategy as well.

The whole thing is being designed as a way for him to make a nice return on his money while he helps me get my business jump started. I also get the added benefit of having a full time book keeper, lawyers, and other professionals at my disposal.

I appreciate all of the replies guys. Some of them helped me figure out how to make this work. This thread can now die in peace.
 
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