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valuing a small business to invest in
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there is nothing fair / unfair in such deals. it is an art than a science.  what kind of things should be considered, to work out what would be a fair percentage stake a true fair value is; take the current valuation of the company [this can be difficult if it is small and does not maintain proper records]. divide by number of shares, that is the value of share and you should 20k worth of such shares. but then there is risk premium. you are taking a risk that an small start-up may do exceedingly well ... or it may close off. this risk premium is what is negotiated. it depends on how desperate the owner of the small company is; who all are interested in this specific deal ... if you want 30% share; someone else is ready to offer 20k for 15% of share. or there is no one willing to lend 20k as they don't believe it will make money ... and the owner is desperate, you may even get 50%.
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