What was your annual Return on Investment from your business in 2023?
Last week I wrote about intangible values for the year. Today, we are going into a few of the numbers to provide you with food for thought.
Your business is likely a large part of your total financial portfolio. You are surely expecting to make a good return on all the assets you have invested. What is the return you made on the investment you have in your business?
Calculating that number is easy:
Dividends + Unrealized Appreciation = Annual Return
Beginning Value of the Business
Mary’s business’ estimated value as of the end of 2022 was $3,000,000.
She paid dividends of $100,000.
The estimated value of the business as of the end of 2023 is $3,450,000.
$100,000+ $450,000 = 18.33 percent annual return
Where do you get the valuation numbers? If you, like Mary’s management team, have a Buy Sell Agreement with partners and/or a Phantom Stock Plan to provide long-term incentive benefits for key managers, * you are having your business professionally valued annually to provide that number. In fact, having that annual appraisal is good for her business, as you can see from the results.
If you’d like to have a discussion about the annual ROI you are achieving with your business or other topics related to planning for your exit, selling your business or adding a business to your portfolio, please reach out to me at 224-688-8838 or email me at [email protected].
We’re here to help you Harvest Your Potential!
*Increasing numbers of landscape businesses of all sizes are putting these plans in place for their key people. These are effective plans for rewarding and retaining your key people. Call us for a discussion about the benefits and costs.