About Professional Planning Associates Expertise Questions relating to business plan preparation, contents, approach and how to prepare plans that provide investors with the information required to make an investment decision
Experience Professional Planning has been operating since 1993. Its principal has over 30 years of business experience. The Company's financial expert has earned a Doctorate in Accounting
Organizations Gold Coast Venture Capital Club, Coral Ridge Kiwanis
Publications Investor's Business Daily, Vfinance.com, the Black Entrepreneurs Association, Webentrepreneurs.com andIslamiQMoney.cpm
Education/Credentials B.A. from Hofstra University
Expert: Professional Planning Associates Date: 10/25/2004 Subject: Investor pay back on investment
Question I understand that figuring the return on investment, (ROI), can be a very complex issue depending on the type of investment, etc. I would like to know, generally speaking, how to determine the ROI on an investment, not so much as how much to offer but in how it's paid back.
Does the investor get a certain percentage in equity stake and participate in profits? Or, does the investor get his money paid back first, then participate in profits from an equity stake?
I hope there's some sense to this question. If I'm off or missing anything, please elaborate.
Thanks in advance,
Bill Thomas
Answer Bill:
Let me give you a broad overview. Most venture capital investors acquire an equity position equal to 20 to 40 percent of the company. The most common investor goal is to be out of the company within 5 years, either as the result of a merger or acquisition by a larger company or by going public. They would like to end up with 5 times their investment after their exit. In general, profit particpation is not a motivating factor. As with and general overview there are a great deal of variations depending upon the investor, the company and market situations.
