Finding the Path to Profit

Making money requires money. Those accepting the risk of loss, in any investment, are motivated by a disproportionate prospect of profit over loss.

Investors prepared to finance startup, early stage and even established companies, need to be convinced the business will be able to create growing revenues for the company and profit for the investor.

We believe that royalties are both the better way of investing in and financing privately-owned companies. The investor receives an agreed percentage of the company’s revenues, for an agreed period, and the owners of the business retain all of their ownership.

First, the investor must be convinced of the immediate, growing and sustained demand for the developed product of the company. The percentage of the company’s revenues, royalty rate, and other terms of the royalty, will be based on the projections of the company and the degree to which the investor accepts them as being reasonable.

Although the revenue royalty investor does not expect to ever be an owner of the company, the need to believe the company will be sustainable requires that anticipated profit margins be disclosed and discussed.

However, as the royalty investor is wholly focused on revenue growth the economic prospects for the company’s customers must be favorable for the company’s revenue projections to be viewed as being minimally achievable.

It is reasonable, in negotiating the terms of a royalty, probably using our 4 different modeling approaches, as available online at REX-Basic.com, that the royalty rate will be variable, based on cumulative royalty payments. The website calculators show the annual rates of investor returns and royalty issuing company likely valuation, if the projected revenues are achieved.

A great deal of additional information and ideas are available at our royalty focused blog Journal at arthurlipper.com and in “Royalty Revenues” and “Off The Top”, both available at amazon.com.

 

 

Arthur Lipper, Chairman
British Far East Holdings Ltd.
chairman@REXRoyalties.com
+1 858 793 7100

© Copyright 2019 British Far East Holdings Ltd. All rights reserved.

 

 

Blog Management: Viktor Filiba
termic.publishing@gmail.com