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I'm a programmer looking to invest some money into opening a very very small restaurant which will be run by my friend (who's a professional restaurant manager) with occasional help from family members.

I am a full time programmer and due to reasons outside the scope of my question, I will rarely if ever visit the restaurant. I have never done anything like this before. I want to know how to monitor the revenue and expenses of a small business without stepping foot in it and how to make sure that no one is cheating.

  • Hire the CPA that does the taxes? Then you can see the quarterly financials at least. – D Stanley Nov 13 '18 at 22:03
  • @DStanley My brother is a professional accountant, doesn't have CPA though, could he do that? He's a close friend of the manager in question – Lynob Nov 13 '18 at 22:42
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    So long as he's qualified to do the books and get the tax return right, sure. The bottom line is you need to be able to see the financials that are reviewed by a third party. – D Stanley Nov 13 '18 at 22:44
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    @Lynob My point was more that if you drop money in, one time, as an angel investor, then it's not clear to me what value you would get out of reviewing the financials-- your investment is gone and your investment mode would prevent you from having much impact no matter what. But if no papers have been signed yet, perhaps you could set terms allowing you to review financial statements every quarter and lay out the conditions for recovering your investment. – Upper_Case Nov 13 '18 at 23:32
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    You are throwing away your money, @Lynob. Fussing about details means nothing. You know how some people play the lottery heavily, thousands of dollars a week. And then they make a huge investigation of those systems "which numbers to pick!?!??!!!!". It >>>>>>>>>>>>>>> DOESNT MATTER <<<<<<<<<<< which numbers you pick. You're a lottery addicted person throwing away money on the lottery. You're about to burn in a pile some of your money. The details you are fussing about mean >>> nothing <<<. – Fattie Nov 14 '18 at 15:50
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Like D Stanley said, hiring the accountant in charge of the business/restaurant is likely the best you can do if you don't want to visit it often.

But since it is a small business, maybe your friend is going to do the accounting by himself on an application or website (like quickbooks.com). In that case you could (and should) go take a look at the expenses and the revenue evertime you want. Those websites/softwares are really easy to use.

  • My brother is a professional accountant, doesn't have CPA though, could he do that? He's a close friend of the manager in question – Lynob Nov 13 '18 at 22:43
  • This will achieve absolutely nothing. Zero. (1) the accountant will charge some fees. (2) the "single-handed operator" will do exactly what is always done. – Fattie Nov 14 '18 at 15:48
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    Your brother will be of utterly no value, @Lynob. When the money is completely gone in a few weeks he will say the most famous word in the English language, sorrreeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeee. Sorreee! Sorreee! What else will he be able to say? He's not going to give you your money back from his own pocket. – Fattie Nov 14 '18 at 15:52
  • As far as I know the question was not : ''Should I invest in a friend business''. And @Lynob if you have access to the "real" documents, then yes your brother could help you summarize the wealth of the business. Altough I'm not telling you not to invest in your friend's business, I strongly advise you to think about it. – Gainz Nov 14 '18 at 16:59
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I would keep track of the revenue and expenses by asking him how his business is going periodically over a beer and not investing in it at all.


Even though I'm comfortable with my original answer, I'll elaborate because this comment gets to the heart of the matter.

you noticed details I didn't even think about, it's my first time, I get the feeling that I'm going to be screwed due to my lack of experience eventually, but I'd like to give it a try

There's a huge, massive, incomparably different financial commitment to starting a business versus buying stock in a public company that there should be two different words; because they're not both "investing" (even though obviously they're both investing).

I'd venture that all of your investing activity to-date involves buying some publicly traded and regulated securities. A publicly traded company with reasonable volume means your money can go in and out whenever you feel like it, practically speaking. Feel like owning Apple for an hour, no problem. When you buy shares in Apple, you're buying them from some other person like you (or entity or pension fund or whatever)

When you "invest" in a start-up your money gets spent. You hand $10,000 to your friend, it buys a POS system or pays a contractor to paint or install something or pays an employee, or whatever; it's gone. Your money isn't sitting in an account waiting for you to retrieve it. It is NOT like buying Apple. You get maybe some paper that says you own X% of this thing that spends money; neat. What happens when the company needs more money to pay another contractor, or permits, or a bill? Is there an operating agreement that attaches an obligation to you for capital contributions? Will your X% be diluted if, beyond all odds, someone else buys in? Can the business get a loan? Who co-signs the loan? Under what circumstances would the business seek a loan? Who has the authority to apply for a loan? Do you want to allow your business partners the ability to sell their ownership to anyone (hint: no you don't)?

You don't need an accountant, you need someone who has opened a restaurant from scratch before. Your friend managed someone else's restaurant that was already running? That's not relevant experience, and you have less experience than that. Paying an accountant to tell you how fast your money was spent will just accelerate the spending of your "investment."

There are a plethora of times where starting a business makes sense, and I'm not even completely opposed to starting businesses with friends, but this is not one of those times. You and a friend have an idea for some project that you can code up and maybe bring to market, but there are some costs related to licensing or hosting or paying a designer or, if things go fantastically well, an accountant to file your taxes, great spend the money that way. Start-ups spend money. It's called a burn-rate for a reason.

And one last point, if you move forward with this terrible idea, you probably wouldn't get screwed. At the end you'll still have have the piece of paper that says you own X% of the thing that spent your money. Getting screwed would be the chef embezzling money from you. The failure of a poorly conceived start-up does not constitute screwed. It's really unlikely for this idea to get to a place where there is money to be embezzled.

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This is an really bad idea. Don't do it.

  • Tell friend openly that you decide it was a bad idea, not for you

  • Don't do this.

Your money, in good times, is precious!

Bad times are a breath away.

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You could hire an accountant, they don't need to be a CPA. But your brother who is also a good friend of the manager is probably a bad candidate. You need someone who won't have any conflicts of interest if something goes wrong, for example, if money goes missing.

However, this whole idea sounds pretty terrible. You have no experience as an investor in these sorts of businesses and your friend has no experience starting up a restaurant. The costs will probably be higher than they expected. You'll probably end up losing your investment and your friendship.

Your friend should probably try to save up their own money to start the business and get a loan from a bank if needed. Or they could get investment from an experienced restaurant investor who can also give them valuable advice. Most experienced restaurant investors probably won't take the risk though and you shouldn't either.

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