Business ROI, cash yield and payback: three different questions.

ORDENNE editorial · 7 November 2026 · Educational analysis

Start with the full amount invested.

The asking price is only part of the initial commitment. Add acquisition costs, agreed fees, the initial working-capital contribution and immediate investment needed to operate. If purchase consideration already includes a normal level of working capital, add only the top-up actually needed. Double counting this amount can distort the denominator just as badly as leaving it out.

Annual cash yield measures one year.

Annual cash yield equals annual distributable cash divided by total capital invested. For this framework, cash is after operating expenses, replacement owner or manager pay not already deducted, maintenance capital expenditure, incremental working capital and cash tax. It is before financing. An annual cash yield is not the total return from holding and selling the investment.

Simple payback is a rough time measure.

Simple payback equals invested capital divided by positive annual cash, assuming that cash remains constant. AED 2.2 million divided by AED 275,000 gives eight years. The calculation ignores the time value of money, changes in cash generation and proceeds on sale. A loss-making business has no positive simple payback under the stated cash-flow assumption.

Holding-period ROI includes the exit assumption.

A simple undiscounted holding-period ROI equals total cash distributions plus net exit proceeds minus initial capital, all divided by initial capital. An assumption of AED 1.5 million of distributions and AED 1.8 million of exit proceeds on AED 2.2 million invested gives 50% over the holding period. It is not 50% a year. The exit proceeds must include everything actually returned at exit, net of selling costs, without counting the same working capital twice.

Use uncertainty to improve the model.

A single constant cash-flow figure is a starting point. Build year-by-year cash flows for a real decision, include any funding shortfall and assess discounted value or IRR using explicit timing. A short payback claim does not remove the possibility of capital loss. Ask what happens if cash falls, a major replacement is needed or no buyer is available at the assumed exit value.

Make the assumptions visible.

Use your own numbers. The calculator assumes constant annual cash flow, no debt and no change in cash flow; it does not measure suitability or guarantee a result.

Both business ownership and property can lose capital. Consider liquidity, concentration, operating responsibilities and independent advice for your circumstances.