Private equity is the standard for investors with no outside relationship to the project. Usually, these deals ask for a 120% return on investment, so have your budget person translate this amount for you if you’re not mathematically inclined. However, savvy investors understand the risks involved, and that this 20% profit margin is often less than the normal return on investment due to the amount of time involved. For example, if a project takes two years from start to finish, this means a 20% return over those two years, which is really 10% per year. Granted, this isn’t chump change, but it’s not like asking Warren Buffett to manage your funds. Either your equity investors need to believe in the long-term viability of your project (think the “Paranormal Activity” sequels), have some other interest that makes them ignore the obvious downsides or simply not know better.
- An Oral History of “Swingers” – So Money