4 ms·
A good enough rate of return is 10% - most companies operate on 10-15% IRR. What you need to rememeber is that this 10-15% is AFTER adjustment, ie write offs fo
by notauser 18y ago
A good enough rate of return is 10% - most companies operate on 10-15% IRR. What you need to rememeber is that this 10-15% is AFTER adjustment, ie write offs for risk, overheads etc.
In government contracting (fairly low risk), with a target profit margin of 10%, gross margin required can easily be over 25%.
> $10 in return in 2 to 5 years for every $1 they invest.
Over a 5 year period a 900% total return is 58.5% anual return. Assuming they get a hit one time in six this would equate to a profit of about ten percent (gross - before overhead costs etc), which is pretty low. Any less and they would be better off doing something else with the money.
Of course if all six startups are a hit they make out like bandits - but if you take the risk you get the reward. They could just as easilly end up with six losers.