1. Your valuation is correct and considering you only have an idea, its pretty darn good.
2. The 2.5% of profits would come after the salaries. Salaries aren't profits. That said, you can't just pay all your profits out to you in salary. You will need to set that up ahead of time with his / her input.
3. Lastly, just from an outsider perspective, your buyback clause comment makes it sound like you are being a bit greedy. You have an individual who you call your friend and who is giving you a good valuation and you are
a) concerned about 2.5% share of the profits s/he will get (relative to your collective 97.5%)
b) Trying to pull the shares out from under him whenever you like.
An investment is a partnership and it is, to say the least, bad karma to screw over a partner. He is risking his money for the upside. An upside comes at an acquisition or an IPO not a buyback from the founders.
If you don't want to give up equity, don't take money. If you need money, equity is what you trade. This will likely not be the last time you make this trade, so start getting comfortable with it. Still, it sounds like maybe you will be happier with all 100%.
1. Your valuation is correct and considering you only have an idea, its pretty darn good.
2. The 2.5% of profits would come after the salaries. Salaries aren't profits. That said, you can't just pay all your profits out to you in salary. You will need to set that up ahead of time with his / her input.
3. Lastly, just from an outsider perspective, your buyback clause comment makes it sound like you are being a bit greedy. You have an individual who you call your friend and who is giving you a good valuation and you are a) concerned about 2.5% share of the profits s/he will get (relative to your collective 97.5%) b) Trying to pull the shares out from under him whenever you like.
An investment is a partnership and it is, to say the least, bad karma to screw over a partner. He is risking his money for the upside. An upside comes at an acquisition or an IPO not a buyback from the founders.
If you don't want to give up equity, don't take money. If you need money, equity is what you trade. This will likely not be the last time you make this trade, so start getting comfortable with it. Still, it sounds like maybe you will be happier with all 100%.
All that said, get a lawyer.