The importance of ROI to a buyer.

What is ROI?

• Return on Investment, commonly referred to as ROI, represents the total economic return a buyer requires on an investment given the risks related to that investment.
  • For example, if a buyer pays $1 million for a company that generates $100,000 in after-tax income, assuming no future growth in earnings, the ROI for that investment is 10 percent.
• Return on investment is directly related to the inherent risks of a particular business or investment. If the ability for an investment to generate predictable returns is less certain, the risk and its related ROI are consequently higher.
• While companies within an industry may appear to have similar characteristics, a closer examination of company specific financial and strategic matters may reveal otherwise. These differences will cause a buyer to attach a different risk profile to each company, and consequently, a different value.

The importance of ROI to your business

• The ROI a buyer will demand from a business is directly related to its risk profile and ability to generate consistent and predictable returns. To a buyer, the risk of a business is determined by evaluating a variety of key factors, which serve as the basis for valuing that company. An experienced advisor can help you identify and effectively address these key factors in order to maximize value.

Identifying and managing business risks

• Identifying, managing and navigating risks inherent in a business are important when building and eventually selling a successful company.
• Risk management is therefore critical to preserving firm value.

Generational Equity associates have years of experience identifying and managing business-related risk

• The associates at Generational Equity have decades of collective experience analyzing and managing business-related risk from a financial, accounting and legal perspective.
• We are experts at assisting our clients manage business-related risks in order to execute premium transactions that preserve value.