Good evening Mr. Collier,
I hope life is treating you well. When you get a moment could you please answer the below question?
Thank you for your time!
At what percentage do you feel a business should operate on?
Varies according to the industry and the risk; software/tech tends to have high margins, grocery much, much lower. Plus, percentage of what? Sales? Equity? Total Capitalization (Debt and Equity?) Short answer is whatever return is necessary to attract investors/capital. Also, it is important to think in “real” terms (Percentage return in excess of current inflation rate) v. nominal. An 8% nominal return can be excellent when inflation is 2%, terrible if inflation is 10%.
Please take what you hear about the returns others are making with a grain of salt; folks tend to talk about their winners and go silent re losers. Plus, there can be a bit of puffing/bluffing/aspirational projections in numbers; I was once at a Harvard Business Club small group gathering where a group of hedge fund managers said they were targeting “high teens” returns but would quietly settle for mid-teens.
As always, I share what I most want and need to learn. – Nathan S. Collier