For any type of business, regardless of the industry, it is in, measuring and keeping track of the profitability and expenses can be a challenge. The situation becomes more overwhelming as the company grows big. Ideally, return on Investments (ROI) is a measure in which a business owner can determine the amount of net profit relative to the cost of the investment.
A successful ROI calculation is one that has a determined figure for the profitability of both tangible and intangible costs. The question is, how much net profit ROI in a span of 2 years can be considered a good investment? Below are a few points that will put you into perspective as to whether or not your investment is successful.
The time value of money
Your return expectations should change depending on the time value of money. In this case, the nature of your investment has a role to play in the time value of money. A great example is changing up the years of investments; if, for instance, you doubled the amount of your investment in 8 months, your returns might hit 30% net profit. If you decide to stretch the period to 2 years, then the returns shoot to 70%. Again, it depends on the kind of venture you invest in, but understanding the time value of money with allow you to align your expectations appropriately.
Compare to key stock indices
Depending on the period of your investment, the expected net profit should vary. Different factors, like, the current economic climate, can affect the net profit you gain on an investment. For example, investors of between 2007-2009 got a different return percentage as compared to those between 2015-2017.
In one situation, you may choose to extend your years of investment and realize a drop in your profit margins, while others mean a significant increase in your net profit value return. You must understand that some years will be better than others. If therefore, the stock market indices for your two years of investment indicate a 50% ROI, then a 70% net profit would be an outstanding investment for you.
Proper compensation
Once you break even on your investment, the goal is not just to earn a regular salary out of it. The idea is to acquire adequate compensation for your investments based on your value of the capital investment, and in such a case like this, then a 70% net profit return in 2 years in a significant investment.
Comparison of returns to invested capital
As an entrepreneur, an investment speaks a lot about your choices in business and ultimately prophesies on your success as a business person. Business ownership is very risky on its own, and it comes with a lot of efforts. Therefore, have a goal of doubling your invested capital, which will give you 100% net profit over that span of time. However, the longer you invest your money for, the higher your return expectations should be.
Consider more than money
In engaging with business ownership, there are a lot of resources involved in the investment plan, other than financial resources. Time, human resources, among others, are involved. Before you can deem a specific venture as unsuccessful based solely on the returns regarding value, consider other things you have gained while at it.
For example, do you have additional labor to get things done? If 70% net profit over 2 years is not good enough for you in terms of dollar value, consider the other things like publicity of your brand, discovery of better investment opportunities, contracting tenders from both public and private sectors, revelation of strategic threats and flaws, which can be actionable insights for you as an entrepreneur.
Bottom-line, business ownership and the art of investing can be very overwhelming, even for experts. All you need to determine is what means more to you, guided by your initial goal of taking on that investment. Visit https://serpbook.com/blog/rank-tracking/ for more on what you can do for your business website.
Dancun Kingori
Writes for businesses that want to see their sites at the helm of Google SERPs. His education background in communications and public relations has given him a concrete base from which to approach different topics in various niches. His writing skills can be confirmed on upwork.com, where he is a top-rated freelance writer. He especially enjoys writing website and blog content for startups and established businesses. https://serpbook.com
