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Suppose you can run a small Yoga studio on the following (average) annual budget:
Revenue: £100k (fees) Expenses: £85k (£45k teachers' wages, £20 admin costs, £18k space rental, £2k maintenance) Profit: £15k
Alternatively, you can buy the space for, say, £250k and pay the £18k/yr in mortgage payments.
Is there a non-toxic way to raise the £250?
One could value the business at £750k put it in trust, sell £250k worth of "equity shares" to buy the property, and pay 1/3 of the revenue (the total of "rent" and "profit" above) to the holders of the equity shares.
At the other extreme, one could value the business at £1.39M, put it in trust, keep £210k worth of equity shares for oneself, and sell £250k worth of equity shares to outside investors. This results in paying 18% of the revenue to the external holders of the equity shares, and 15% to oneself.
In the first case, the equity shares have an expected return of 13.3%, and in the second of 7.2%
Am I totally off?
The problem, in any case, is finding people who, collectively, have £250k to spare. The mortgage solution just requires (say) £25k, together with the "bank magic" of (say) 10% "reserve requirement". "It's the statue, man, The Statue."
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