This work of design art could represent the decision-making process of some investors and business owners when considering the use of royalties.
Some investors could believe that for them it is better to become an owner of a company in which there is hope and therefore they believe that increased profitability will create increased market value from which they could benefit.
Some business owners could believe that they would be hurt by paying a percentage of their future revenue for money than would be too costly to be attractive to them.
These are both single dimensional and flat views which for some may be correct, but they fail to focus on the added dimension of the benefit of using the money raised to increase revenue, from which they would benefit.
From the investor’s perspective, it is easier to predict longer term revenue trends than future profitability. Revenues are a measure of customer satisfaction, whereas profitably is a measure of company management’s ability to balance cost of production, including marketing, as relating to product pricing.
Also, in the case of royalties, the investor can be paid quarterly, without profit-related conflicts and time-consuming determination.
From the business owner’s perspective, the acceptance of investors as co-owners of the business requires the owner to become a fiduciary, resulting in making all management decisions to be based on what’s best for all of the owners of the business.
Also, if the funds received for the sale of a percentage of revenues, but not company ownership, are used effectively in increasing revenues, it is likely the business will be worth more in the future. Therefore, the controlling shareholder will regret having sold equity for a lower valuation than what is possible after the funds from the royalty investor have been used.
It is the flexibility in structuring royalties to meet the needs of both investors and business owners which makes them multidimensional and superior to the flatness of traditional ways of financing businesses.
For more information regarding royalties see: http://rex-basic.com/, http://rexdebt-shareroyalties.com/, http://rexsxcaledroyalties.com/ and REX-RIAR.com. Additional sources include the following eBooks available form Amazon Revenue Royalties and Off The Top and http://www.royalties.com/ and http://arthurlipper.com/.
Arthur Lipper, Chairman © Copyright 2019 British Far East Holdings Ltd.
British Far East Holdings Ltd. All rights reserved. June 8, 2019