them using the Return on Investment (ROI) formula. This will tell you what percentage of return you will get over a specified time. Three years is a good rule of thumb used by many expanding businesses. ROI is determined by taking the total investment sum, working out the increased sales it will generate each year and the net profit from that, then calculating that as a percentage of the investment. For example, suppose a business wants to add a new product line that it predicts will cost an investment totalling $200,000 in development costs, plant, marketing and promotion. It estimates the new line will generate $400,000 in sales and $40,000 in net profit each year. Timescale Additional net profit in period ROI calculation (net profit/investment x 100) ROI (%) One year $40K 40K/200K X 100 20 Three years $120K 120K/200K X 100 60 Five years $200K 200K/200K X 100 100 It's a good idea to test the ROI with a number of different sales figures. While you may think additional sales could reach $400,000 a year, a number of factors - such as development problems, delays or sales and marketing issues - may result in lower sales in the early stages. You may also wish to adjust your calculation to allow for annual inflation. Financing your growth strategy Sound financial planning is the foundation of any growth strategy. Firstly, you should establish: ow much investment is required to fund the venture when it will be needed when it will be