The “X” Factor

How much of a return are you getting on the money you have invested in your retail operation? Is your business paying off better than other investments you might make with the same money? Or would you be better off, from a financial standpoint, working for someone else and turning your investment capital over to a financial manager?

We all have “gut reactions,” but one way of verifying your hunch is by working out your ROE, or Return On (owner’s) Equity. ROE is the percentage of your personal investment that your business returns each year in pretax profits.

Use your ROE to compare the potential return of other types of investments, such as stocks, bonds, money market certificates, professional baseball teams, etc. Admittedly, it’s a cold financial calculation that doesn’t consider the intangibles in your business, but you’ll still profit from knowing where you stand, even if a sellout is nowhere in sight.

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