Return On Investment

The first question that comes to our minds whilst we are exploring new business opportunities is the ROI or the Return On Investment. This is one of the most critical factors in deciding which way your decision goes, in choosing a business to start. Most entrepreneurs look for businesses that have a high return on investment, and make that as a start point of their business search, after which they look at other factors. Return on Investment is generally defined as the net profit a business generates after provision of all expenses, taxes, depreciation and interest.

A business is termed healthy if it has a positive ROI. Several service businesses could be low on capital, but could take away a lot of your time, hence when you add the cost of your time with the investment that you have made, that's when you get a more realistic Return on time and capital invested.

At times, property owners or pure investors just invest their capital in form of space or money and then directly co-relate the returns from that perspective. All franchise companies will always show a healthy estimated return on investment to the prospective franchisees, however, as an entrepreneur you will have to really validate every component of that estimate and see how realistic the returns could be. As a franchise company, the prime responsibility of the franchise, is to ensure that they are able to provide healthy return on the franchisees investment.