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What is a realistic return for a small business?

Of course you can make nothing, and even lose everything . But what is considered an average return for a "successful" business? If you have done this several times, what is your expectation when you get started? Sage advice appreciated

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The BAF Group LLC

Will, I did not answer this when you posted it, because there is really no "right" answer. But since no one else ventured a try, I will offer some insight.

The ROI for a small business is not something that is normally quoted, so it is difficult to gauge what others are thinking. And it varies directly with your own appetite for that Return. If you are trying to do it as an Absentee-Owner, certainly the ROI has to be larger, since you will have to pay a Manager to operate it in your stead. If you are an Owner/Operator, that number can be lower - theoretically.

Moreover, there are A LOT of variables, in answering that question. ROI varies widely, dependent upon the industry, how new the business is and whether you are still in a growth and re-investment phase of the business, the overall state of the economy and how your business fits into that cycle and so on. Some people will tell you that if it is a positive number at the end of the year, that is a good ROI!

Perhaps the best answer is: If you did not invest in this specific business, what else would you do with your money and how much could you earn from that alternative investment? I always suggest doing a Business Plan that examines the variations in starting a new business or buying a mature operation of the same kind, and if you are buying a business, what is the historical earning picture and what you can foresee for future income. That can be the key.

Sep 6, 2012

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