Most business advisors working with a business owner, or a business seller will use the word return.
‘Return’ in a business (or anything else for that matter) is about buying a stream of future earnings (profits). Return is usually expressed as a percentage of the funds invested.
A high-quality freehold accommodation business is placed into the market at a price of one million dollars offering a ‘10% return’ ($100,000 annually).
This means the seller is asking the buyer to pay 10 years’ worth of future profits now, for the benefits of owning the business.
$100,000 pa over 10 years = $1,000,000. Conversely $100,000 divided by $1,000,000 = 10%.