When Should You Quit in Business?

Bookmark and Share

If you could sit back and relax, you can generate an annual average of 10% return on X investment.

That's what you'd typically get on average if you invest in an index fund that tracks the S&P 500.

That is:

  1. You sit back and chill-ax.
  2. You drink your lemonade and turn on your inner Alicia Keys.
  3. You wait for your invested funds to grow to 10% at the end of the year.

Now, get this:

  • What if you spend 365 days working your butt off for a 5% return?

That's what many crazy-hard-working companies are doing: They're working their butts off when they could just be chill-axing by a poolside turning on their inner Alica Keys, and getting their 10% returns at the end of the year.

  1. "We got a 3% return last year! High-five!"
  2. "Let's continue setting world-record rip-roaring returns and aiming for 3.3% this year!"
  3. "WOOT! WOOT!"

How do you distinguish good companies/industries from bad companies/industries?

Take a look at some financial reports on Yahoo Finance or Google Finance:

  • If the company's ROE < 10%: not good.
  • If the company's ROE > 10%: GOOD.

The point is this: If you can't consistenly achieve a higher return than the S&P's annual average, look for different opportunities that will enable you to obliterate the fasheeezy out of the S&P.

Quit opportunities that give you measly returns; if you get low returns, you're most likely thinking too small.

Example: You + Computer Shop

For instance, say you're running a computer service shop.

  1. You achieved 7% returns last year.
  2. You got your customers through advertising.
  3. Most customers were 1-and-done transactions.

Quit your current approach, and think bigger:

  1. "Let's not settle for 1-and-done transactions. Let's try to increase the average number of customer transactions to 2 or 3."
  2. For instance, put customers on an email list, and give them periodic tips and deals on your services.
  3. Soon, you start noticing an annual return of 12-20% simply because you increased the average number of customer transactions from 1 to 3.

Think larger and better, and you'll find greater returns.

Beat the market.

If you enjoyed When Should You Quit in Business?, get a complimentary subscription to our freshest articles through email or through your feed reader.

Posted on October 06

WTH is Trizle?

Trizle helps you rock ___ with your business.

Subscribe

Get a complimentary subscription to our freshest articles through email or through your feed reader.

Don't Miss Out!

Subscribe to Trizle through email or through your feed reader.