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Investor Questions...............


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This is a serious question:

 

If someone were to Invest $6,500.00.............what would be a reasonable time frame for the Investor to have a return of $10,000.00?

 

If someone were to Invest $8,500.00.............what would be a reasonable time frame for the Investor to have a return of $12,500.00?

 

If someone were to Invest $10,000.00...........what would be a reasonable time frame for the Investor to have a return of $15,000.00?

 

The Key words are "reasonable time frame"............ 6 Months, 8 Months, 1 Year, 2 Years, 3 Years? Would 2 Years be Unreasonable?

 

Also......are those "Good" Returns? "Great" Returns? or "Not Worth It" Returns? for the Investment Amounts?

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This is a serious question:

 

If someone were to Invest $6,500.00.............what would be a reasonable time frame for the Investor to have a return of $10,000.00?

 

If someone were to Invest $8,500.00.............what would be a reasonable time frame for the Investor to have a return of $12,500.00?

 

If someone were to Invest $10,000.00...........what would be a reasonable time frame for the Investor to have a return of $15,000.00?

 

The Key words are "reasonable time frame"............ 6 Months, 8 Months, 1 Year, 2 Years, 3 Years? Would 2 Years be Unreasonable?

 

Also......are those "Good" Returns? "Great" Returns? or "Not Worth It" Returns? for the Investment Amounts?

 

 

If you simply use the Rule of 72, you can see some simple scenarios to see how long it takes to roughly double your money. You can derive "reasonableness" by looking at an interest rate view. Then stack up your returns using your investment vehicle by which you expect to obtain that return.

 

Of course, reasonableness in this day and age is all dependant on tolerance for risk and what your appetite is for riding the risk curve.

 

What investment vehicle are you considering?

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Keep the cash. At least you won't lose money. i won't be back in the market until at least October, maybe November. The summer doldrums are lasting way too long.

 

My cash account at .01% is ahead of the guys that play the market.

 

Just my 2c.

Edited by twobjshelbys
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OK, here is what I am doing:

I am starting a new Business doing New Custom Harley Davidson Motorcycles and need at least $6,500.00 to do a Prototype for Advertising and Shows. I am going to put an Ad on either Craigs List or Ebay looking for an Investor of $6,500.00 to $10,000.00 so that is why I am asking the questions in the First Post. The local H-D Dealer is going to supply the Motorcycles as needed. I hope to produce at least 20 by Christmas.

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I see. You are looking at providing the return to an investor(s). You are going to need to do a financial analysis on this and look at payback periods, cost of capital, and probably most imporant ---- IRR(Internal Rate of Return). The IRR will help gauge the profitability of the investment. Of course, these multivariable views can become complex and this may not match your situation exactly. However, the IRR will help others see the profitability.

 

In your case, and perhaps to simplify it, you will need to calcuate the total cost of the product, what you expect to sell(price) it for, and provide a margin estimate to the investors.

 

Then you can derive a payback percentage to your investors based off the margin(portion of margin they will expect to receive) expected units sold, etc.

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TesGT350,

 

In my examples, I probably should have used a portion of PROFIT the investors expect to receive versus margin. But you get the idea. Do a simple "what if" scenario with IRR and look at what you net in a 1,2,3,4,5 year period from the sales. Then, calculate whatever the "payback" is expected to the investor and that will determine how quickly the investor will recoup their investment.

 

Let's say each Harley produces a $200 profit with an expected 20 units a year sales. Over a five year view, the IRR for a $6500 investment in Year 1 and a net of $4000 per year in years 2-5 should be around 49%.

 

Then let's say you keep $100/unit of the profit and the investor gets the other $100/unit of the profit. If I did this right, the payback period for the investor would be a little over three years. ($2000 a year)

 

You can create a super simple Excel formula sheet with the investments across the top and NET for each year on the next rows(take 1-10 years) and then simply do an IRR on the cells. Then just create some payback period "what if" sections from the profit estimates.

Edited by stewarbc
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TesGT350,

 

In my examples, I probably should have used a portion of PROFIT the investors expect to receive versus margin. But you get the idea. Do a simple "what if" scenario with IRR and look at what you net in a 1,2,3,4,5 year period from the sales. Then, calculate whatever the "payback" is expected to the investor and that will determine how quickly the investor will recoup their investment.

 

Let's say each Harley produces a $200 profit with an expected 20 units a year sales. Over a five year view, the IRR for a $6500 investment in Year 1 and a net of $4000 per year in years 2-5 should be around 49%.

 

Then let's say you keep $100/unit of the profit and the investor gets the other $100/unit of the profit. If I did this right, the payback period for the investor would be a little over three years. ($2000 a year)

 

You can create a super simple Excel formula sheet with the investments across the top and NET for each year on the next rows(take 1-10 years) and then simply do an IRR on the cells. Then just create some payback period "what if" sections from the profit estimates.

 

 

 

For $6,500.00 Investment, I plan to pay the Investor $1,000 from each of the first 10 Sold for a total of a $10,000.00 Return to the Investor.

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For $6,500.00 Investment, I plan to pay the Investor $1,000 from each of the first 10 Sold for a total of a $10,000.00 Return to the Investor.

 

 

Okay. I'm trying not to complicate this but there are some more details needed.

 

Referencing your prior comment of "I hope to produce at least 20 by Christmas". I am trying to answer your question about reasonableness for return.

 

1. I assume you expect to produce ~5/month from 9/1 until Christmas. I also assume you expect to sell some units prior to Xmas and possibly to also take advantage of Xmas season(awesome Xmas gifts/purchases).

a. Do you expect these units to move quickly due to the custom mods?

b. If so, what is your expected timing/movement of the units? 1/month?

c. Do you have committed buyers yet that you could bank on?

 

2. Is your payback to the investor based off a cumulative block of 10 units sold or is a $1000 payback immediate upon the sale of a single unit? I am trying to get an idea of payback period for the investor and answer your original question of reasonableness. The best way to do that would be to assume how many units will move in what time period.

 

3. As it stands now, the investor stands to make roughly a 54% rate of return(($10000-$6500)/$6500) X 100% but the question is under what time period. Assume one year and it could look very attractive but it all depends on the expected payback periods.

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How much risk? It use to be about 10% return on good, fairly safe investments but those aren't around much anymore unless you take a good amount of risk. Bonds, cd's, stock market, mutual fund, IRA (what type), realestate, etc...more info. please.

Edited by jsarkis
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Okay. I'm trying not to complicate this but there are some more details needed.

 

Referencing your prior comment of "I hope to produce at least 20 by Christmas". I am trying to answer your question about reasonableness for return.

 

1. I assume you expect to produce ~5/month from 9/1 until Christmas. I also assume you expect to sell some units prior to Xmas and possibly to also take advantage of Xmas season(awesome Xmas gifts/purchases).

a. Do you expect these units to move quickly due to the custom mods?

b. If so, what is your expected timing/movement of the units? 1/month?

c. Do you have committed buyers yet that you could bank on?

 

2. Is your payback to the investor based off a cumulative block of 10 units sold or is a $1000 payback immediate upon the sale of a single unit? I am trying to get an idea of payback period for the investor and answer your original question of reasonableness. The best way to do that would be to assume how many units will move in what time period.

 

3. As it stands now, the investor stands to make roughly a 54% rate of return(($10000-$6500)/$6500) X 100% but the question is under what time period. Assume one year and it could look very attractive but it all depends on the expected payback periods.

 

 

 

<01a> I believe that once the Prototype is finished and seen, they will sell.

 

<01b> Production turnaround time, once I receive the Motorcycle in my Shop

Should only be 3 to 4 Days.

 

<01c> The People I have talked to would like to see a finished Motorcycle.

 

<02> To make Book Keeping easy, I plan to write a Check to the Investor when

each Package is sold. 10 Packages Sold = 10 Checks written to Investor

($6,500.00 Investment).

 

<03> Personally, I would hope to have the Investor paid back with in 6 Months,

BUT, with this economy it’s hard to say. I will be offering 3 different

Packages to help speed up the process. And I plan to add 2 more Packages to

the line up in late 2012 when the 2013 Harley Davidson’s hit the Showrooms.

I am Limiting the "SMI" Package to 25 per Year Model, the "RPI" Package to 43 Per

Year Model and the "American Patriot" to 25 per Year Model making it 93 Motorcycles

per Year. I am offering the Packages on 3 different H-D Sportster Motorcycles to. I am

starting production with the "SMI" Package and if people do their homework, they all

could have a "1 of 1" Limited Edition Motorcycle. There will be a Registry for these

Motorcycles on my Web Site.

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