Finance

Is there a target return that I should be looking for when I invest in a company?

Guest Writer
Entrepreneur, Business Planner and Angel Investor
min read
Opinions expressed by Entrepreneur contributors are their own.
Return has to relate to risk too. You don't know the future. Are you ready to lose $190,000? Do you have a good business plan, have you studied this business well and do you feel you've minimized the risks? Does the return depend on you? Or are you investing in somebody else (which always increases the risk)?

One of the things they teach in business school is that there is no standard acceptable risk or standard acceptable return. People have very different risk preferences. Getting $300,000 back from $190,000 is great if it's a sure thing and you can afford it without noticing if you lose. If there's a good chance of failure, then success should be worth more than $300,000. Venture capitalists generally invest only in businesses that can increase their investment value 10 to 100 times in 3-5 years, because they know that the failure rate is so high that the successes have to pay for all the failures.

Tim

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