How To Calculate ROI (Return On Investment)
Learn to calculate ROI in seven steps–increasing your chances of landing an investor and dusting the competition.
The Gotham Gal and I make a fair number of non-tech angel investments. Things like media, food products, restaurants, music, local businesses. In these investments we are usually backing an entrepreneur we’ve gotten to know who delivers products to the market that we use and love. The Gotham Gal runs this part of our investment portfolio with some involvement by me.
As I look over the business plans and projections that these entrepreneurs share with us, one thing I constantly see is a lack of sophistication in calculating the investor’s return.
The entrepreneur needs $400k to start the business, believes he/she can return to the investors $100k per year, and therefore will generate a 25 percent return on investment. That is correct if the business lasts forever and produces $100k for the investors year after year after year.
Click below to read the full article from Entrepreneur Europe.