Stephen Tashiro
05-01-2010, 6:35 PM
People who talk about personal finance make pronouncements about getting the best return on capital. That's reasonably objective if you make passive investments like CDs or stocks. I wonder if small businessmen can ever objectively evaluate their return on capital - not just for one project, but for their entire business activity, say for 1 year.
I think it would be a difficult calculation to make accurately. It's probably hard even to compute what one's "capital" is. Then you have all the unique situations - like maybe the business employs a relative or in-law who needs a job.
So I wonder what a typical return on capital is for the local McDonald's franchise, a small restaurant, a plumbing supply store. It wouldn't surprise me if it was less than the 10% return that people often use as a goal for passive investments. People are very particular about how they make money. Everyone has different
tastes.
I think it would be a difficult calculation to make accurately. It's probably hard even to compute what one's "capital" is. Then you have all the unique situations - like maybe the business employs a relative or in-law who needs a job.
So I wonder what a typical return on capital is for the local McDonald's franchise, a small restaurant, a plumbing supply store. It wouldn't surprise me if it was less than the 10% return that people often use as a goal for passive investments. People are very particular about how they make money. Everyone has different
tastes.