is it a good idea to invest in a new nightclub in los angeles?

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Clarification of Question by harlanhobbs-ga on 10 Mar 2005 12:26 PST

i have been asked to put up the full $150,000 dollars for the club and
i offered a max of $50,000. I was then told they could work with the
50 just start off as a restauraunt and a smaller location. (caribbian
food) Based on this info what are your feelings?

Considering the lack of information in your question - and the fact it
was posted here- probably not.

How much money do you want to lose?

9 out of 10 businesses fail in the first year.  I'm sure that any
given type of business (a nightclub or a restaurant or a mini golf
course...) will have a different statistic, but it won't look
extremely well.

If you cannot afford to lose that $50,000 then you should be confident
that you will succeed, and have very good reason to believe that
you'll succeed where 9 out of 10 people fail.  Opening a business is a
very risky yet potentially very rewarding venture.

Please consider your opportunity cost:
$50,000 invested at 11% (the market average over the last 85ish years)
will double about every 6.5 years.
YEAR $$$$$$$$$$$
2005 $50,000
2011 $100,000
2018 $200,000
2024 $400,000
2031 $800,000
2037 $1,600,000

Get good advice from smart people about your business.  Ask your
friends if they can see you succeeding where others fail, if they're
honest they might even point out what qualities they think you need to
work on to be a successful business owner.  Make sure you have a
complete and realistic business plan.  And once again, consider your
option of simply investing that money.

Best of luck in your business venture should you choose to go that route!

Dear Harlan, 

Here are the questions you want to ask:

1) How much experience do these people have operating a restaurant?
If they have many years of successful experience, with a good track 
record, it's worth considering. 

If they have no experience - skip it. Restaurants are very romantic
and charming - but they go out of business faster than any other
type of business enterprise. And $50,000 is not enough to open a
restaurant in Los Angeles. It's barely enough to outfit it with
the kitchen appliances, freezers, etc. and the dining room furniture. 
There's not enough money there to cover the cost of employees.

2) Do they have a business plan? 
No? Run. Don't walk. They'll just lose your money for you. 

3) Does their business plan include a budget?
Read the budget. Does the budget include costs for
employees, insurance, advertising, accounting? 
Are the amounts enough to cover their realistic expenses?
Does the income they project look realistic, too?

OK...keep thinking.

4) Where are their customers going to come from?

Oh heck, tell you what...invest $15 or so and pick up this 
book in your local bookstore

Small Business Taxes Made Easy
How to Increase Your Deductions, Reduce What You Owe, and Boost Your Profits
http://www.amazon.com/exec/obidos/tg/detail/-/0071441689/

Read the first two chapters with your prospective partners. 
See how they answer the questions to the business plan issues -
and how much of the Start-Up Checklist they have completed, then decide. 

Frankly, if you're going to be the only investor and no
one else's money is at risk - this is probably a bad investment.
Unless they are famous chefs, have a following and really know
how to get the media out to their place to cover their opening
and to keep it in the news or the tabloids.

LA has lots of interesting and exotic restaurants. So, new ones
get traffic for a while due to the novelty factor. But we're
really demanding on service, quality and price - and if the
restaurant is an amateur production, we don't return. 

Good luck!

Your TaxMama-ga

>Please consider your opportunity cost:
>$50,000 invested at 11% (the market average over the last 85ish years)
>will double about every 6.5 years.
>YEAR $$$$$$$$$$$
>2005 $50,000
>2011 $100,000

At ww.forex-traders.info you may not have to wait that long till you
doubled that amount although nobody could promise that as past results
are no guarantee
for future results.

Thank you Forex for that spam.