I’ve been watching old episodes of shark tank/dragons den. I know that: ludicrous amount of money for <10% = laughable deal, but I don’t know what it means to have a percentage in the company. My understanding is it’s how much of a say you have in the company? Not even sure that’s right.
In: Economics
Generally, it’s ownership, which is both financial and “how much say you have.” Say three people own a company, even split 33% (ish) apiece.
Let’s say that this year that company made $300,000 in profit, after all expenses – pure profit here. We’d split that profit evenly – $100,000 to each of us.
Now let’s say we had an important decision to make – let’s buy another company and try to double our business. If we chose to vote on it, each of us has an equal vote, and the majority would make the choice.
10% owned by a shark would work the same way. Any future profits the company made, they’d be entitled to 10%. If the company was ever sold, they’d take 10% of the proceeds. If anything important ever came to a vote, their vote would count for 10% of the total. It’s why it’s very common for people to own 51% of a business – if you own 51% and anything ever gets voted on, your vote always wins. Nobody else can make a decision without your approval.
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