Objective: To determine your minimum return on investment goals prior to going into business.
Purpose: When you have completed the worksheet, you will know in advance the type of return you can expect from your business undertaking and can avoid future disappointments.
Action Steps: This is perhaps the most important Action Step in this guide. As a small business owner, you are in business with the intent to make a profit, hopefully a large profit. Understanding the mathematics of business could save you from spending years in a business that does not provide the return on investment you had expected. For example, consider the restaurant business. The average rate of return on an indepen¬dently owned restaurant is 8-12%. The owner usually invests $50,000-100,000 into the business, works 10-16 hour days as an owner/employee and then makes only a $5,000-10,000 profit (10%) for the year-long effort. Even if you factor in tax savings, in this example, the owner probably should have invested the money in no-load mutual funds for a greater return without the 10-16 hour days. Contact us for statistical information on businesses you are considering.