As a tech consultant for startups, I often hear people misusing multiples and percentages. As a primer, here's a simple table showing you what things look like when you buy and sell a company.

Starting Cash Ending Cash Percentage of Return Return Multiple
$1M $1M 0% 1x
$1M $1.5M 50% 1.5x
$1M $2M 100% 2x
$1M $3M 200% 3x
$1M $4M 300% 4x
$1M $5M 400% 5x
$1M $6M 500% 6x
$1M $10M 900% 10x
$1M $20M 1,900% 20x
$1M $100M 9,900% 100x
$1M $1B 99,900% 1000x

How to Calculate Return on Investment

If you invest $50k into a project and receive $64k, then your Return on Investment is 28%. You calculate this by subtracting the current (or expected) value from the original, then divide again by the original.

soulver-roi

For those of you who like algebra, here's a second way to show the same info. 

# Starting Investment
investment = $50k

# Current (or expected) Value
value = $64k

# Rate of Return / Return on Investment
ror = value / investment

# Decimal of Return 
decimal_ror = ror - 1

# Percentage of Return
percentage_of_return = decimal_ror × 100
How to Calculate an ROI

Keep It Simple

Here's yet another way to present the same information as the table above.

percentage-multiple-roi
Side-by-Side comparison of Multiples and Percentages

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