Joint venture waterfall distribution models can be used and structured in all sorts of ways and in all business types. The most common uses often end up in real estate or oil and gas deals. However, their uses easily extend to any business sector.
This model is a preferred return joint venture model. Preferred return is much different than preferred equity (preferred equity may have a preferred return attached to it). This model is based on the investor leg having a claim on the return, but not on the contributed equity. In simple terms, this means the initial equity is not returned in the calculations.
Note, investor also means LP or limited partner and sponsor means GP or general partner.
The inputs are driven in the following manner:

  • Contributions and distributions of the project as a whole are defined in period 0 through 10 where applicable
  • The percentage of contributions attributed to the LP are defined (and GP therein)
  • The preferred return rate is defined for the LP
  • Any shortfalls can either be compounded to principal, accrued but not compounded, or wiped clean each period based on two switches.

Based on the cash that is available to distribute, there may not be enough to cover the preferred return. If not, the unpaid return can either be:

  • Accrued and paid later when there are more cash flows 
  • Accrued to the LP balance and increase future returns whenever there are more cash flows (and get paid down to the initial equity contribution)
  • Returns can be wiped clean each year even if there are shortfalls. 

The above can be modeled with two ‘yes/no’ switches.
This Excel template is very easy to use and is designed to work after you know the per period cash contributions and distributions. You plug that in and adjust the pref. Rate / contribution rates. All other logic flows from there.

Reviews Add a review
No reviews yet

More From smarthelping

Browse our top rated business templates. See All
Startup Food Truck Financial Model
 Starting up a food truck requires some financial planning, modeling, and assumptions about potential revenues, growth, and costs. This is…
SaaS Model: Driven by Account Executive Quotas and Ratios
 This SaaS model is focused on driving growth from bottom-up assumptions and ratios for all relevant employee types that naturally…
Golf Course 5-Year Financial Model
Starting up a golf course can be done in a few different ways. You could have a membership-based model, a…
Reordering Inventory: Tracker and Organizer
This template is designed to keep track of many inventory SKUs. The main benefit is in organization and logic to…
Used Car Lot Startup Financial Model: 5 Year
This is a high level general model for used car lots / dealerships. The logic was designed for a quick…
Startup Freemium SaaS Financial Model: 5 Year
 A freemium business model can be modeled with a few basic levers. This template makes it easy to configure and…
See All