Among the Key Performance Indicators when determining if a business is a good investment is the critical ROI.
Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. It is a percentage that is most commonly measured as Earnings (net income) – Cost (the original cost of the investment) divided by Cost.
ROI = (Earnings-Cost)/Cost
ROI should never be overlooked when buying a business. Determine what your goals are and assess business opportunities to find the best ones to meet your goals. For example, Dawn & Nick decide to buy a franchise resale from BGG Ventures, Inc. They are looking to be in the business for just 7 years and would like an ROI of 40% to buy a new Batmobile. They have 200,000 to invest. Dawn & Nick need a business that has a net profit of $70,000 a year to achieve their goal. Can they do it? Find out the next time I post another blog.
Merry Christmas and Happy New Year Everyone!