ROI Question

[Matic]

Someone is going to invest $25,000 for me to advertise my site youtube.com I plan on making money by getting a lot of consistent traffic after the advertisement runs, and then selling advertisement space on my site as well as use google pay per click etc. How much should the return of investment be for this sole investor? When should this payment be made?

Thanks in advance,

--Troy

[shawnman19]

It depends on what your investor wants in the end. And what agreement you want to make with him. Is he going to get a part of the ownership of your business for this investment?

If I were you I would try to hold on to as much of ownership of it as you can if you plan on selling it down the line.

Monthly or Quarterly payments are best, most people like Monthly. Weekly is just way to often.

[Matic]

not ownership of the company as I do plan on selling it down the line, however, i want to give them money back. How much is it usually and when is it usually?

[akula]

30% p.a. is the hurdle rate for private equity investment

if the security used is different to plain vanilla equity, the rate will be lower - commensurate with lower risk

most often, concept stage startups will issue convertible notes at S&P500 + 5%

in other words, about 20% p.a - but these figures do not apply to your situation

the money is repaid pursuant to a schedule outlined in the agreement, which is the product of pro-forma cashflow statements and investor preference. most often, the loan is repaid in monthly instalments

overall: the correct phrasing for your question is "what's the hurdle rate on a venture like this?" (higher rate means riskier venture)

the answer is that "you're way into tripple digits" becaue I think your idea is completely unworkable. buying ads on youtube is not a plan for how to execute keyword arbitrage

so....to answer your question...this scenario has nothing to do with R.O.I.

that's an ex post measure of how much the investor actually returned on their money

what you are looking for is diffrent. you're looking for an ex ante measure for how much of a return your investor should expect, based on how risky the venture is

because I think that that there's no chance that you'll suceed, the hurdle rate should be 100%+, meaning that if the investor is gonna get anything back from this investment, it better be ALOT because most likely - they'll get nothing.

hope that helps

that's the basic approach for how to answer "How much should the return of investment be for this sole investor?" (i.e. get a hurdle rate)