Futures Bet - Deconstructing the ROI
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
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, Fred and Ray decide to buy a franchise resale from Zarian Firm. They are
looking to be in the business for just 4 years and would like an ROI of 40% to buy a new
Batmobile. They have 200,000 to invest. Ray and Fred need a business that has a net
profit of $70,000 a year to achieve their goal. Can they do it? Stay tuned.
Listen to my segment on Pillars of Franchising 11/28/18 to learn more.