Business Advice

[Cornishblue]

Hi all

Im in a bit of predicament at the moment. To cut a long story short a couple of months ago I met a guy who isn't short of cash and a close friend to my partners uncle and after a conversation we agreed to start a aerial drone business together. Since then we have had several meeting and between us we have completed a very in depth business plan. The starting cost is going to be £4000 which include the drone (PP3), Ipad, CAA qualification and marketing cost which we have been quoted at reduced price as my good friend is a graphic designer.

This all sounds good but the investor wants 40% of the profits in year one then 30% of the profits in year 2. He also wants me contribute £500 to show I am also committed to the business. He doesn't want to be a silent partner and is happy to give advice and also take care of the accounts which would remove that cost.

Im kind of undecided at the moment on what to do. I could decide to go it alone buy a drone myself and (£1200) try to master it, and in six months time if Im getting good results with a showreel which would attract paid work then buy the CAA licence also. This way I could own the business outright and all its profits. If in six months time if things aren't going well then I could resell the drone and I would only lose a few hundred quid on the resale.

Or do I let the investor take the financial hit (minus the £500 quid) and if it goes tits up then he loses out. But if things do take off then he will take eventually take 30% of my business profits

I am currently a photographer with a degree in the subject and also get some paid work when Im not at my full time job.

Landscape

Any advice would be much appreciated

Aiden

 

[bbfpv]

Is he only contributing the £4000 or will he continue to cover unforeseen expenses (you crash the P3, marketing costs more than expected, etc)? What happens if you don't turn a profit your first year? Most new businesses don't. Most don't in their 2nd year either. Is he willing to stick it out and continue to invest while there is no income? Does he own the equipment since he paid for it? Who is paying your living expenses?

 

[BigAl07]

I was initially considering a financial investor (they are fairly easy to come by with the popularity and potential for income of the "Drone" ) but when I sat down and really ran the numbers I didn't want to be "Working for someone else". Part of the allure of this was being my own boss and make it or break I would be making all the calls. Very nice feeling after "working for the man" for so many years.

Unless you have a very good written contract odds are you are going to be deeply tied to the investor and keep in mind he is investing to make $$ from your work. What is your "exit plan" should the business not take off as expected?

It will take a while to build a business and the costs can be considerably more than what you've listed. Businesses need accounting, computers, supplies, local licenses etc. Make sure he is willing to cover those costs too or you may be in for a rough ride financially. I've been doing this for a year now and the idea of turning a genuine profit in a year isn't being very realistic. Maybe 2-3 years down the road this should be completely different (and it does get better once you establish a name and reputation) but for the first 12 - 24 months the bank account seems to have a never ending hole in the bottom LOL!.

Also don't forget to figure in Insurance. I'm not sure how it works on your side of the pond but over here it's a very good idea to have a min of liability coverage and hull coverage is a plus if you can get it. Many of my customers require it to work on their projects. It's money well spent IMHO.

 

[Cornishblue]

Is he only contributing the £4000 or will he continue to cover unforeseen expenses (you crash the P3, marketing costs more than expected, etc)? What happens if you don't turn a profit your first year? Most new businesses don't. Most don't in their 2nd year either. Is he willing to stick it out and continue to invest while there is no income? Does he own the equipment since he paid for it? Who is paying your living expenses?

Hi thank you for your reply. We havent spoken about future investments but it its an interesting point, he has however said that if he can justify any cost then he is prepared spend. We both work full time so at the moment for drone training and putting together a showreel I would have to shoot full time over the weekend and do all my editing, marketing etc over the week days. If I begin to get paid work then I will have to use holiday leave unless its at weekends. I would expect he would own the equipment but I also have a Macbook Pro 15" 2015, Canon 5Dm3, and a dozen lenses as ground shooting will be a most. So if you add all my equipment to the equation then it seems im adding more value to the business then he is

 

[Cornishblue]

I was initially considering a financial investor (they are fairly easy to come by with the popularity and potential for income of the "Drone" ) but when I sat down and really ran the numbers I didn't want to be "Working for someone else". Part of the allure of this was being my own boss and make it or break I would be making all the calls. Very nice feeling after "working for the man" for so many years.

Unless you have a very good written contract odds are you are going to be deeply tied to the investor and keep in mind he is investing to make $$ from your work. What is your "exit plan" should the business not take off as expected?

It will take a while to build a business and the costs can be considerably more than what you've listed. Businesses need accounting, computers, supplies, local licenses etc. Make sure he is willing to cover those costs too or you may be in for a rough ride financially. I've been doing this for a year now and the idea of turning a genuine profit in a year isn't being very realistic. Maybe 2-3 years down the road this should be completely different (and it does get better once you establish a name and reputation) but for the first 12 - 24 months the bank account seems to have a never ending hole in the bottom LOL!.

Also don't forget to figure in Insurance. I'm not sure how it works on your side of the pond but over here it's a very good idea to have a min of liability coverage and hull coverage is a plus if you can get it. Many of my customers require it to work on their projects. It's money well spent IMHO.

I was initially considering a financial investor (they are fairly easy to come by with the popularity and potential for income of the "Drone" ) but when I sat down and really ran the numbers I didn't want to be "Working for someone else". Part of the allure of this was being my own boss and make it or break I would be making all the calls. Very nice feeling after "working for the man" for so many years.

Unless you have a very good written contract odds are you are going to be deeply tied to the investor and keep in mind he is investing to make $$ from your work. What is your "exit plan" should the business not take off as expected?

It will take a while to build a business and the costs can be considerably more than what you've listed. Businesses need accounting, computers, supplies, local licenses etc. Make sure he is willing to cover those costs too or you may be in for a rough ride financially. I've been doing this for a year now and the idea of turning a genuine profit in a year isn't being very realistic. Maybe 2-3 years down the road this should be completely different (and it does get better once you establish a name and reputation) but for the first 12 - 24 months the bank account seems to have a never ending hole in the bottom LOL!.

Also don't forget to figure in Insurance. I'm not sure how it works on your side of the pond but over here it's a very good idea to have a min of liability coverage and hull coverage is a plus if you can get it. Many of my customers require it to work on their projects. It's money well spent IMHO.

Thanks for your reply.

No we havent talked exit plan yet. He isn't a business man but just a regular guy with a lot of cash. Hes reasonable he understands the hidden costs and will be happy to cough up for it if needs be.

 

[bbfpv]

How is your credit? If he brings nothing else to the table but money, talk to a bank and get a personal loan or small business loan. Use any profits to pay down the loan, and when it's paid off you get to keep the equipment and 100% of the profit. Giving up 30% of your profits for the life of the business seems pretty ridiculous considering you're only getting $4k out of the deal, and you're the one doing all the work.

 

[BigAl07]

I completely agree with bbfpv above. Think long term... you will regret giving up %% to your hard work.

 

[Cornishblue]

How is your credit? If he brings nothing else to the table but money, talk to a bank and get a personal loan or small business loan. Use any profits to pay down the loan, and when it's paid off you get to keep the equipment and 100% of the profit. Giving up 30% of your profits for the life of the business seems pretty ridiculous considering you're only getting $4k out of the deal, and you're the one doing all the work.

Ye my credits OK, not brilliant but ok. I do however have savings somewhere between 10k and 15k ;-) This is why I thought it would be good to buy the drone and see how things go. If im kicking *** creatively and as a drone pilot then get the CAA licence. tricky ?

 

[Cornishblue]

Ye my credits OK, not brilliant but ok. I do however have savings somewhere between 10k and 15k ;-) This is why I thought it would be good to buy the drone and see how things go. If im kicking *** creatively and as a drone pilot then get the CAA licence. tricky ?

If im not kicking *** then sell the drone and try and get as much money back as possible. Also the ground videography is going to play a massive role to, which would all be my investment (equipment etc).

 

[bbfpv]

That makes the most sense. I'd cut this guy out of the picture, figure out if it's a feasible business as you get more experience in the air, and then figure out where the money is coming from.

btw, I'm pretty sure you won't be selling the bird even if it doesn't work out for you. It's just too much fun, even as a time waster on the weekend. Good luck in your endeavor.

 

[Cornishblue]

That makes the most sense. I'd cut this guy out of the picture, figure out if it's a feasible business as you get more experience in the air, and then figure out where the money is coming from.

btw, I'm pretty sure you won't be selling the bird even if it doesn't work out for you. It's just too much fun, even as a time waster on the weekend. Good luck in your endeavor.

Cheers friend, to be honest I was kinda siding with that option but wanted some outside opinions. Now my mind is set ill be buying my PP3 and Ipad tonight. Thanks again

 

[750r]

That's the right choice all you . The 40% then 30% is a great deal for him . You will be working your butt off while he sits back and collects the money then he might try and micro manage you and that won't turn out well .

 

[Cerone]

No way I'd agree to that.