It means she'll own 30% of the business, and, ostensibly, receive 30% of any earnings paid out. She benefits by receiving those earnings and any appreciation in the value of business. The sellers (of the equity position) benefit by receiving the cash she offers for that equity stake (e.g. that cash is used to expand the business, i.e. increase production, marketing expenses, other cash needs). They "give up" 30% of the ownership in exchange for that cash, thus they only then own 70% of the business.
When, for example, one of the sharks offers say $100,000 for 30% of the business, it means they are valuing the business at $100,000 / 0.30 = $333,333.33 total business value. [ The "0.30" is 30% in decimal form.] The sharks often appear to "undervalue" the business, but without that cash infusion (from selling the equity position) many of these businesses otherwise wouldn't survive. They need that capital (the cash) in order to continue in business and/or grow the business. The sellers (shark bait) often are willing to sell an equity stake at an undervalued price because they're desperate for cash, and can't get financing elsewhere.
An equity stake in a business is a portion of the business, in return for (commonly) a cash investment. The investor earns income on that portion of the business while the business has the advantage of some handy cash.
Peace.
The ratio between equity and capital ..... is the estimated value of a business.
The investor will own 30% of the business.
It means that she would Own 30% of the company
Hello, I like watching the show shark tank. Barbara offered 30% equity in ones business. What is she talking about, & how do both benefit? Thanks!
