I am studying for my General Insurance / Management exams, and plan to enter into the Insurance Brokerage field.
I currently have a connection to a firm that will be for sale shortly (Valued at $4MM, with annual sales of $1MM and profits of $600,000 CAD).
Being a student entering university in September, I do not have the capital to purchase this corporation up front. I have prepared a presentation to the current owner offering the following:
He will maintain an 80% stake in the company for 3 years.
After which, he will maintain a 60% stake in the company for 3 years.
After which, he will maintain a 40% stake in the company for 3 years.
After which, he will maintain a 20% stake in the company for 3 years.
Finally, he will maintain a 10% stake in the company for the remainder of it's existance, and will be entitled to 10% of the profits when I sell the company in 20+ years.
** As I have also been studying investments, I will be expanding the business to both insurance and investment brokerage (expecting 5% annual growth of profit).
My questions are,
Would you take this deal if you were the owner of the company?
Would I be better off finding a VC firm or angel investors group to fund this?
What (typically) to VC firms require in return for such an investment.