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Financial Empowerment

What’s a Good Return on Investment (“ROI”) For Business Owners?

Start on Purpose encourages all business owners to think like investors. If you invest a penny in your company, take no-salary or a reduced salary, or provide personal guarantees on your company’s loans or leases, then you are entitled to a positive return on the cash you have at risk in your venture.

So what is an acceptable return on your invested cash?

If you take funds out of publicly-traded stock mutual funds that earn say 6% annually, then you should seek a much higher return because of the added risk of investing in a single, privately-held company.

Also consider the time value of money to set your performance goals. In simple terms, if you triple the value of an investment in three years, you will earn a robust return of approximately 44%. If you triple the value of the same investment in five years, the time-adjusted financial return drops to approximately 38%.

Strive to at least triple the value of the hard cash you have invested in your business. Average angel investors and venture capital fund investors shoot for a return of 4 to 10 times their invested capital. Bigger funds want even more…but don’t usually get it.

Calculating Debt-to-Equity Ratio Capitalization Table
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