Startup Funding Espresso -- Profit Sharing
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. Many startups use profit sharing to fund their business.\xa0 It is important that everyone involved has a very clear understanding of how \u201cprofit\u201d is calculated. There are three locations in the startup\u2019s profit and loss to dip in and take out a \u201cshare\u201d to pay back an F&F investor. They are as follows:\xa0 Top-line revenue is the most often used. Gross profit is the revenue minus the cost of goods sold or what it cost to make the product.\xa0 Net profit is the revenue minus the cost of goods sold and expenses. To know how much profit to share, you must first build a financial model. Another key issue is when to start payments to the investors.\xa0\xa0 You could set a timeframe such as 3 to 6 months out, or upon closing a customer sale\xa0 You could set a specific amount of revenue or profit or whenever you are able to payback. There needs to be a limit to the amount of profit sharing. It could be a specific dollar amount or a time limit. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today.-----For more episodes from Investor Connect, please visit the site at: Check out our other podcasts here: For Investors check out: For Startups check out: For eGuides check out: For upcoming Events, check out For Feedback please contact info@tencapital.group