Question
I've been asked to ADVISE an established small biz in exchange for a PERCENTAGE of monthly revenue.
THREE SPECIFIC QUESTIONS:
1. This is a small biz that is cash flow positive monthly -- should I ask for a larger % of gross or smaller % of net?
2. Anyone have contract examples they are comfortable pointing to or sharing?
3. Accountability of payouts -- I'm guessing I need to ask for ongoing access to bank account and sales reports?
Thanks kindly,
Josh
Answer
Josh,
My experience is:
1-Net. It shows that you are committed to the value creation and not only bump sales (that maybe leave no profit). It also helps you get a better understanding of the company as you will get all the financial info of how do they get to that number. If you ask for sales only, you don't know how they are doing.
2-Sorry, can't.
3-Usually you will ask for the balance sheet or IRS reports (if in the US, gets more tricky outside). This should be good enough. Remember is all based on trust and mutual benefit.
One last piece of advise, set yourself accountable. Ask what do you need from me, how often, what do you expect, what do you want me to deliver. Put it on paper, so then you know that there will be no future problems on what you did. Advise is a complicated asset to value, as clear you can get, the better.
