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Return on Capital Employed

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Richard HerdReturn on Capital Employed
by on Jun 1, 2012 at 7:26:59 am

This is me pontificating. I'm sorry. It's important to get this business term out there.

Return on Capital Employed (ROCE) is the name for the idea that if a dollar is spent then that dollar is earned plus some profit.

Saying the same thing in another way: if you spend $1.00, then you need to return $1.33.

The client for instance should be sending a check for $1.33.

To be sure, there's other details (like depreciation schedules) to work out with your CPA, but please -- and I've been explaining this a lot lately so I beg your pardon if you already know it -- do not work for free.

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Michael HendrixRe: Return on Capital Employed
by on Jun 1, 2012 at 3:42:41 pm

That's the magic. The toughest part really is including everything in the $1.00. If you leave a cost out of the dollar, it comes from the .33.

Thats how people go out of business.

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Craig SeemanRe: Return on Capital Employed
by on Jun 2, 2012 at 4:07:23 pm

And it seems many don't know what to include in that dollar.

The biggest missing piece seems to be your own living expenses. That's not "profit." You need to pay your personal housing, utilities, food, health, if you plan on being able to work.

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