Question

Hi,

Working on a project in my group for class and I am having some issues

My part is current state of the business. It is a store and the annual sales are $460,000

Other info I have is:

Ownership and Compensation; Percent Ownership Personal Investment

Mitchell George, Founder & CEO 25% $125,000Katie Beauseigneur, COO 15% $75,000

Melissa Dunnells, CFO15% $75,000

Also, a medium coffee price from store is $3.75

Sarah Griffin, Marketing Officer 10% $50,000

Katharina Ferry, HR Director10% $50,000

Valerie Freeman, Board Memberand Angle Investor 10% , $125,000

Options pool 15%

Total 100%

Any info is helpful

Answer 1

Since there is not much clarity in the question, I will put my observation about the business and its healthiness.

From the investment perspective, it looks like for every 1 % of the ownership stake, the individual needs to contribute $ 5000 except the Angel Investor, who is contributing $ 12500.

The Angel investor usually does not involve in the day to day business process and instead, takes the benefit when the company scales up. So, the higher cost of ownership stakes gets justified.

Shares need to floated in the market so as to be bought by the public looking to invest from the open market and this further boost up the valuation of the Company and this goes well with Option pool of 15 % Total Shares.

Now, as the annual sales are $ 460,000, this normally gives a very good indication to the firm that it will recover all its Seed capital investments and Operational costs in less than 3 years.

The Total invested Capital = $ 375,000 for 75 % promoter's stake + $ 125,000 for 10 % Investor's stake = $500,000 for 85 % stake.

Moreover, The store promoters hold a total stake of 75 % which gives them enough room for any structural changes required in future.  

Hope, this is helpful in some ways.