I had just finished giving my vaunted Chinatown tour with my father when I told him this. "We're ready to stuff all the restaurants in Chinatown onto an E-commerce site. Restaurant promotion and sales online are a burgeoning business! I've got the approach to capturing some of it!" Seamless and Grubhub are the big boys in the business, last year they did a combined 100 million in revenue. By the way, they just merged. The difference between my model and theirs, not much, except I would put more emphasis on Asian-American proprietors and consumers.
My dad is the old banker type, many of you reading the blog know him or have known him. Well, he wanted to know the numbers. "Right now, I've got a guy who will put together a functional site for five thousand. It will do the basics and that's all we need. He's also a hell of a graphic designer." The gentlemen I'm referring to was referred by a friend in Chinatown. He has twenty years experience in the Las Vegas market. For those of you who know how much good tech cost, five grand for a custom site like I'm talking about is fair. He then asked me what kind of return a potential investor could expect. I gave him a couple of scenarios.
1. Each restaurant on the site has a certain value, for the sake of simplicity let's say they are worth $50 each month. If you have thirty restaurants on a site and they make $50 monthly, we have $1500. After subtracting operating cost, $750 would be left. If you have, for example, five thousand invested. You would receive a percentage of the net, as net increases, so does the amount an investor receives. My projections, which my father is assisting me with, will propose a twofold increase in investment within a year and a half period (five thousand invested will return ten thousand).
2. If an investor is interested in a long term approach. I would offer a scenario of this sort. A five thousand dollar investment would buy a percentage of the site. As the company rises in valuation, so does the equity stake. For the sake of simplicity, let's give the company a valuation of $100,000. If an investment of $2500 is made. I would be willing to give an equity stake of 2.5%. As the company rises in value, the value of the equity investment rises with it.
I like to end every post of mine with a thought I'm having...Call it the village idiot thought of the day. "I'll have detailed projections soon, but, I felt it necessary to give potential investors an idea of what they should expect on their returns."
