Venture Capital Firms

What Type Of Return On Investment Do Investors Look For?

You need money. Therefore, you need someone to invest in your company.

But no investor puts money in a company if he doesn’t know in advance that he will win something from doing this. Business is business! You need to face it. And in order for an investor to gain something back for giving you money, first YOU need to be successful. Every investor knows that the more money you generate, the greater return he will get and the happier he will be.

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However, the higher the risk of an investment, the higher the return on investment that an investor will demand. Investors have to calculate their future returns in order to make present investments and to be sure that these investments will be profitable.

Companies compare the rates of return of different projects in order to select which of them to invest in for them to have maximum return. They do this by taking the average return, payback period, net present value, profitability index and internal return. Also, a return can be adjusted for taxes and inflation. Investors use estimates of future inflation rates and estimates regarding the risk of the investment as main factors to determine the return.

Investors are interested in the real returns of the investments made. Nevertheless, many investors forget to adjust the rate to taxes and inflation, and therefore they don’t get real numbers. In conclusion, what they calculate is the nominal interest rate. But this is what really matters in order to evaluate the profitability of an investment.

Now you know what an investor wants. The next step is to make a great Business Plan and then get to action! Find what you need! Our team of experts is here to help you do this and much more! Find our now!

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