R50/53 The Economics of MINI - very long
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11-03-2003, 10:17 AM
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The economics of MINI…a tutorial for the MINI buyer.
Unlike many automobile franchises, the MINI Cooper franchise isn’t such a great moneymaker as most consumers might imagine.
First, if it weren’t attached to a BMW franchise in one way or another, some, if not most franchisees might not ever make it to profitability. The MINI Cooper franchise as it currently exists loses money. How could that be you ask?
Let’s look at the economics of the typical MINI Cooper dealership.
First, how much do you think it cost to purchase the franchise itself? Don't know for sure, but likely between $1 and $3 million. You gotta sell a whole lot of MINI’s to make up that kind of dough.
Second, the location: Each and every MINI Dealer had to build a separate showroom to MINI specifications completely separate from the BMW side of the business. For some this meant building a whole new facility. For others it meant carving out a piece of an existing building and rebuilding to MINI specs. Cost: minimum $250,000 up to $1 million.
Personnel: Depending upon the number of cars being sold, the average dealership has at least two and more likely four of five Motoring Advisors. The equation is one Motoring Advisor for every 10-12 cars sold per month. Now you have a Manager, someone who runs the show, orders the cars, meets the clients, handles credit inquiries, misc. questions and general management duties. Then you also have to have finance and accounting people. Let’s say one of each.
On the service side you need MINI factory trained techs…two minimum. Training is at the dealership’s expense. Now you need a service advisor to help the clients with paperwork, questions, problems, etc.
So your local MINI dealership has at least eight, likely 10-12 employees specifically hired for MINI alone. With this comes payroll taxes, benefits, sick days, vacation days, etc.
Overhead: Let's look at what it costs to open for business every day. You have electricity, heating, air conditioning, phone service, pens, pencils, paper, folders, legal forms, brochures and sales materials, pre-printed documents used in the sale of each car, credit card machines and service, computers, internet connections, software updates, copier and printer toner, etc.
The above is not meant to be all inclusive, or even completely accurate, but it will serve as good basis to make some calculations.
So here goes.
The minimum profit on each car sold at MSRP is approx: $1,480.00, the average, keeping in mind option packages and other upgrades, is around $1900.00. Seems like a good chunk of dough until you look at the expenses related to selling that car.
Salesperson compensation: On average the salesperson will receive about $325 in overall compensation for each car they sell. That includes things like benefits, payroll taxes, a small salary, commission on the actual sale, etc.
Management compensation: On average the sales manager will receive about $200 in overall compensation for each car sold. This includes all of the same expenses listed above.
Accounting and finance: Here you have about $250 to $300 per car in expenses related to compensation for both of these functions.
Overhead: Your local MINI dealership spends about $450 per car in overhead expenses related to selling just one car. Yep, no joke. It costs big bucks to maintain a showroom, stock it with brochures and other literature…no, MINI doesn't provide that, the dealer buys it. That slick little brochure you picked up when you stopped in and test drove the car costs the dealer about $3.50 each. Dealerships give out about 15 or 20 of those little gems for every car they sell each month. Phone service and electricity are HUGE expenses for a dealership, as is lot cleaning, janitorial services, paper, pens, ink, computers, software, etc.
The car itself costs the dealership money to prepare for you to take delivery. When the car comes off the truck, it needs to be brought into the shop and prepared for delivery. This isn't as simple as pulling the plastic off the car and changing a few computer settings. The car has to be gone through and all functions checked, road-tested, and all paperwork filled out. There are parts that need to be installed, and fluids that need to be filled. Cost to the dealer…about $200.
Now the car needs to be gassed up, about $25.00, then detailed, about $125.00.
Okay, now we have some numbers to be crunched. We know the average gross profit on each car is about $1900.00. The above expenses total about $1625.00. Now, deduct that from the gross profit and you get a total profit of $275.00 per car sold. Try to run a business on that type of profit. Most dealerships add what's called a documentation fee on the sale of a car, usually about $299-$399, to offset some of the above overhead expenses. Add that to the $275 per car and you have about $575 to $675 per car in profit.
Not too shabby really when your selling a bunch of cars. The problem is that they are not selling a lot of cars. The average dealer is selling only 30 to 35 cars per month, that's a total profit of about $17,000 to $24,000 per month. At that rate, it will take the dealership between seven and 18 years to recoup their initial investment. Based on the low end cost of start-up up to the high end cost of start-up
Now we all know that it won't take that long because service income will shorten that to about four to ten years, but the service departments are currently running at a loss because the car hasn’t been out long enough to build up the kind of regular daily business to make that a profitable venture. So you need to deduct the costs related to having the service advisor and techs available for customers from the above profit picture for the time being.
Now another little fact that is sometimes lost on the consumer is something called living on the margin. MINI, unlike many manufacturers, has no hold back or back-end money of any kind. Most domestic and Japanese manufacturers give the dealership two or three percent back when the car is sold. There are also volume bonuses and such. MINI has no such form of dealership compensation. The MINI dealer lives on the margin alone, and that's all she wrote kids.
So the next time you ask yourself why a MINI dealer won't discount, think about the above and ask yourself if you were running this business, what would you do? If you had a very limited supply of one of the hottest products being sold today, would you add a bit to the price to help make up some of the shortfall? Would you ask a premium on certain models? Would you add some accessories to cars in stock to try to increase profitability? Would you discount?
This should open up some good discussion.
Unlike many automobile franchises, the MINI Cooper franchise isn’t such a great moneymaker as most consumers might imagine.
First, if it weren’t attached to a BMW franchise in one way or another, some, if not most franchisees might not ever make it to profitability. The MINI Cooper franchise as it currently exists loses money. How could that be you ask?
Let’s look at the economics of the typical MINI Cooper dealership.
First, how much do you think it cost to purchase the franchise itself? Don't know for sure, but likely between $1 and $3 million. You gotta sell a whole lot of MINI’s to make up that kind of dough.
Second, the location: Each and every MINI Dealer had to build a separate showroom to MINI specifications completely separate from the BMW side of the business. For some this meant building a whole new facility. For others it meant carving out a piece of an existing building and rebuilding to MINI specs. Cost: minimum $250,000 up to $1 million.
Personnel: Depending upon the number of cars being sold, the average dealership has at least two and more likely four of five Motoring Advisors. The equation is one Motoring Advisor for every 10-12 cars sold per month. Now you have a Manager, someone who runs the show, orders the cars, meets the clients, handles credit inquiries, misc. questions and general management duties. Then you also have to have finance and accounting people. Let’s say one of each.
On the service side you need MINI factory trained techs…two minimum. Training is at the dealership’s expense. Now you need a service advisor to help the clients with paperwork, questions, problems, etc.
So your local MINI dealership has at least eight, likely 10-12 employees specifically hired for MINI alone. With this comes payroll taxes, benefits, sick days, vacation days, etc.
Overhead: Let's look at what it costs to open for business every day. You have electricity, heating, air conditioning, phone service, pens, pencils, paper, folders, legal forms, brochures and sales materials, pre-printed documents used in the sale of each car, credit card machines and service, computers, internet connections, software updates, copier and printer toner, etc.
The above is not meant to be all inclusive, or even completely accurate, but it will serve as good basis to make some calculations.
So here goes.
The minimum profit on each car sold at MSRP is approx: $1,480.00, the average, keeping in mind option packages and other upgrades, is around $1900.00. Seems like a good chunk of dough until you look at the expenses related to selling that car.
Salesperson compensation: On average the salesperson will receive about $325 in overall compensation for each car they sell. That includes things like benefits, payroll taxes, a small salary, commission on the actual sale, etc.
Management compensation: On average the sales manager will receive about $200 in overall compensation for each car sold. This includes all of the same expenses listed above.
Accounting and finance: Here you have about $250 to $300 per car in expenses related to compensation for both of these functions.
Overhead: Your local MINI dealership spends about $450 per car in overhead expenses related to selling just one car. Yep, no joke. It costs big bucks to maintain a showroom, stock it with brochures and other literature…no, MINI doesn't provide that, the dealer buys it. That slick little brochure you picked up when you stopped in and test drove the car costs the dealer about $3.50 each. Dealerships give out about 15 or 20 of those little gems for every car they sell each month. Phone service and electricity are HUGE expenses for a dealership, as is lot cleaning, janitorial services, paper, pens, ink, computers, software, etc.
The car itself costs the dealership money to prepare for you to take delivery. When the car comes off the truck, it needs to be brought into the shop and prepared for delivery. This isn't as simple as pulling the plastic off the car and changing a few computer settings. The car has to be gone through and all functions checked, road-tested, and all paperwork filled out. There are parts that need to be installed, and fluids that need to be filled. Cost to the dealer…about $200.
Now the car needs to be gassed up, about $25.00, then detailed, about $125.00.
Okay, now we have some numbers to be crunched. We know the average gross profit on each car is about $1900.00. The above expenses total about $1625.00. Now, deduct that from the gross profit and you get a total profit of $275.00 per car sold. Try to run a business on that type of profit. Most dealerships add what's called a documentation fee on the sale of a car, usually about $299-$399, to offset some of the above overhead expenses. Add that to the $275 per car and you have about $575 to $675 per car in profit.
Not too shabby really when your selling a bunch of cars. The problem is that they are not selling a lot of cars. The average dealer is selling only 30 to 35 cars per month, that's a total profit of about $17,000 to $24,000 per month. At that rate, it will take the dealership between seven and 18 years to recoup their initial investment. Based on the low end cost of start-up up to the high end cost of start-up
Now we all know that it won't take that long because service income will shorten that to about four to ten years, but the service departments are currently running at a loss because the car hasn’t been out long enough to build up the kind of regular daily business to make that a profitable venture. So you need to deduct the costs related to having the service advisor and techs available for customers from the above profit picture for the time being.
Now another little fact that is sometimes lost on the consumer is something called living on the margin. MINI, unlike many manufacturers, has no hold back or back-end money of any kind. Most domestic and Japanese manufacturers give the dealership two or three percent back when the car is sold. There are also volume bonuses and such. MINI has no such form of dealership compensation. The MINI dealer lives on the margin alone, and that's all she wrote kids.
So the next time you ask yourself why a MINI dealer won't discount, think about the above and ask yourself if you were running this business, what would you do? If you had a very limited supply of one of the hottest products being sold today, would you add a bit to the price to help make up some of the shortfall? Would you ask a premium on certain models? Would you add some accessories to cars in stock to try to increase profitability? Would you discount?
This should open up some good discussion.
#2
11-03-2003, 10:28 AM
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#4
11-03-2003, 10:29 AM
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>>As an economist, I will only state that there sure are a lot of assumptions that may or may not be accurate.
>>
>>As a MINI owner, so?
>>
>>jc
>>
>>ps what does this mean &#8217;t ?
hmmm....must have translated funny when I put in the '. should be won't.
>>
>>As a MINI owner, so?
>>
>>jc
>>
>>ps what does this mean &#8217;t ?
hmmm....must have translated funny when I put in the '. should be won't.
#7
11-03-2003, 10:38 AM
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#8
11-03-2003, 10:41 AM
Me thinks " &#8217; " is an abbreviation of " ' ". Must be in Shorthand
Interesting read on the economic breakdown. My understanding of economics doesnt extend too much beyond my own checkbook, but I get the idea. Curious as to where the numbers come from, though they make sense to me as well. Thanks for sharing!
#10
11-03-2003, 10:50 AM
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....a few other factors to add in.
1) A well run dealer should be able to pull in a decent profit on each trade-in car as well. That could make a big difference in the bottom line at the end of the month.
2) MINI is paying almost no advertising. A HUGE savings versus most car companies. Not just in direct costs, but less personnel as well.
3) If MINI made no money but served one of the original objectives of getting new, younger buyers into the BMW showroom that resulted in lifelong customers, then they will make plenty of profit!!!
4) MINI owners are more likely (then typical $20 car owners) to buy original equipment parts, but the MINI options, and have a MINI dealer do work on thier cars.
5) TAX LOOPHOLES to take advantages of the "losses".
You mention that they are not looking to make a profit for ten years, give-or-take, but this isn't such a bad plan. With LARGE companies it is rarely possible to make the capital investment needed without planning to run at a loss for several years. FedEx didn't make a profit for over ten years, those darn planes are expensive, but everyone understood this and knew it was a long term investment, not something that would make money the first year.
This isn't intended to be a critisicm, just an additional 2 cents worth on an interesing little side-discussion.
1) A well run dealer should be able to pull in a decent profit on each trade-in car as well. That could make a big difference in the bottom line at the end of the month.
2) MINI is paying almost no advertising. A HUGE savings versus most car companies. Not just in direct costs, but less personnel as well.
3) If MINI made no money but served one of the original objectives of getting new, younger buyers into the BMW showroom that resulted in lifelong customers, then they will make plenty of profit!!!
4) MINI owners are more likely (then typical $20 car owners) to buy original equipment parts, but the MINI options, and have a MINI dealer do work on thier cars.
5) TAX LOOPHOLES to take advantages of the "losses".
You mention that they are not looking to make a profit for ten years, give-or-take, but this isn't such a bad plan. With LARGE companies it is rarely possible to make the capital investment needed without planning to run at a loss for several years. FedEx didn't make a profit for over ten years, those darn planes are expensive, but everyone understood this and knew it was a long term investment, not something that would make money the first year.
This isn't intended to be a critisicm, just an additional 2 cents worth on an interesing little side-discussion.
#11
11-03-2003, 10:51 AM
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With regards to the $125 for detailing, this should probably be about $50. This comprises one hour labor at $10/hr (unskilled) associated employer costs of $5 per hour (FICA, healthcare etc), $5 or $10 in materials, cloths, chemicals etc. and therest shared with the rest of the business for heating, lighting and other such operating costs.
Since the detailer is only doing 50 cars a month (that will take up about 35% of his time) the rest of his time is spent working on trades taken before they go either to auction or on some other dealer lot. This can be a money maker for dealers since detailing of older cars can turn a scruffy car into somewthing pleasing.
I worked as the preparation manager at an Audi VW dealership for a year or so and know the expenses quite well. Hope this helps clear up an assumption.
btw, the number of $125 is what a punter would expect to pay for a retail detail Yoiu can't mix conversations regarding salaries with retail prices. It's not sound economics.
Since the detailer is only doing 50 cars a month (that will take up about 35% of his time) the rest of his time is spent working on trades taken before they go either to auction or on some other dealer lot. This can be a money maker for dealers since detailing of older cars can turn a scruffy car into somewthing pleasing.
I worked as the preparation manager at an Audi VW dealership for a year or so and know the expenses quite well. Hope this helps clear up an assumption.
btw, the number of $125 is what a punter would expect to pay for a retail detail
Yoiu can't mix conversations regarding salaries with retail prices. It's not sound economics.
#12
11-03-2003, 10:52 AM
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>>Perhaps the point of BMW making the MINI's is to bring people into BMW showrooms that would otherwise believe they could not afford such a car?
>>
>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
Yes, and no. MINI is definitely set up to be a stand alone brand. It will take time, but the MINI dealers will make money on their own. It's an awfully big leap in money to go from a MINI to even the entry level BMW.
>>
>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
Yes, and no. MINI is definitely set up to be a stand alone brand. It will take time, but the MINI dealers will make money on their own. It's an awfully big leap in money to go from a MINI to even the entry level BMW.
#13
11-03-2003, 10:53 AM
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>>Perhaps the point of BMW making the MINI's is to bring people into BMW showrooms that would otherwise believe they could not afford such a car?
>>
>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
That's exactly right. If they can get you into a MINI now, they figure they can get you into a BMW when you get rich in 10 or 15 years.
The lack of advertising has to do with this too. I guess they decided to limit the advertising budget so they could put the ad $ into the pricier, higher volume products, e.g. 3 series, 5 series. And with the word of mouth buzz, it worked out for them.
It's worth potentially losing some $ as a corporation if they can create brand loyalty for years to come. Sneaky bastards.
>>
>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
That's exactly right. If they can get you into a MINI now, they figure they can get you into a BMW when you get rich in 10 or 15 years.
The lack of advertising has to do with this too. I guess they decided to limit the advertising budget so they could put the ad $ into the pricier, higher volume products, e.g. 3 series, 5 series. And with the word of mouth buzz, it worked out for them.
It's worth potentially losing some $ as a corporation if they can create brand loyalty for years to come. Sneaky bastards.
#14
11-03-2003, 10:55 AM
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>>With regards to the $125 for detailing, this should probably be about $50. This comprises one hour labor at $10/hr (unskilled) associated employer costs of $5 per hour (FICA, healthcare etc), $5 or $10 in materials, cloths, chemicals etc. and therest shared with the rest of the business for heating, lighting and other such operating costs.
>>
>>Since the detailer is only doing 50 cars a month (that will take up about 35% of his time) the rest of his time is spent working on trades taken before they go either to auction or on some other dealer lot. This can be a money maker for dealers since detailing of older cars can turn a scruffy car into somewthing pleasing.
>>
>>I worked as the preparation manager at an Audi VW dealership for a year or so and know the expenses quite well. Hope this helps clear up an assumption.
>>
>>btw, the number of $125 is what a punter would expect to pay for a retail detail Yoiu can't mix conversations regarding salaries with retail prices. It's not sound economics.
Ahh, but what if the MINI dealer doesn't have people on staff to detail the car. Perhaps they hire out to a company that comes in and details cars, as is the case with many dealers.
>>
>>Since the detailer is only doing 50 cars a month (that will take up about 35% of his time) the rest of his time is spent working on trades taken before they go either to auction or on some other dealer lot. This can be a money maker for dealers since detailing of older cars can turn a scruffy car into somewthing pleasing.
>>
>>I worked as the preparation manager at an Audi VW dealership for a year or so and know the expenses quite well. Hope this helps clear up an assumption.
>>
>>btw, the number of $125 is what a punter would expect to pay for a retail detail
Yoiu can't mix conversations regarding salaries with retail prices. It's not sound economics.Ahh, but what if the MINI dealer doesn't have people on staff to detail the car. Perhaps they hire out to a company that comes in and details cars, as is the case with many dealers.
#15
11-03-2003, 10:57 AM
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>>>>Perhaps the point of BMW making the MINI's is to bring people into BMW showrooms that would otherwise believe they could not afford such a car?
>>>>
>>>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
>>
>>That's exactly right. If they can get you into a MINI now, they figure they can get you into a BMW when you get rich in 10 or 15 years.
>>
>>The lack of advertising has to do with this too. I guess they decided to limit the advertising budget so they could put the ad $ into the pricier, higher volume products, e.g. 3 series, 5 series. And with the word of mouth buzz, it worked out for them.
>>
>>It's worth potentially losing some $ as a corporation if they can create brand loyalty for years to come. Sneaky bastards.
Actually, MINI spends about the same amount per car as BMW does on advertising. They chose different mediums to advertise in than most manufacturers.
>>>>
>>>>MINI itself does not have to make a profit if it is able to generate more profits elsewhere for BMW.
>>
>>That's exactly right. If they can get you into a MINI now, they figure they can get you into a BMW when you get rich in 10 or 15 years.
>>
>>The lack of advertising has to do with this too. I guess they decided to limit the advertising budget so they could put the ad $ into the pricier, higher volume products, e.g. 3 series, 5 series. And with the word of mouth buzz, it worked out for them.
>>
>>It's worth potentially losing some $ as a corporation if they can create brand loyalty for years to come. Sneaky bastards.
Actually, MINI spends about the same amount per car as BMW does on advertising. They chose different mediums to advertise in than most manufacturers.
#17
11-03-2003, 11:04 AM
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I think my local dealership is making money. Heres why....
1)The advisors trying to sell me a MINI don't have a clue about it. = No education expense.
2)I had to insist deeply, that indeed my MINI is able to be serviced by this MINI-licenced dealership.
3)I'm convinced only one mechanic is aware the of the MINI (oil change took 6 hours), even then, only the common workings. Anything else (other than oil and the gas light error) takes "3 business days."
1)The advisors trying to sell me a MINI don't have a clue about it. = No education expense.
2)I had to insist deeply, that indeed my MINI is able to be serviced by this MINI-licenced dealership.
3)I'm convinced only one mechanic is aware the of the MINI (oil change took 6 hours), even then, only the common workings. Anything else (other than oil and the gas light error) takes "3 business days."
#18
11-03-2003, 11:11 AM
Most of the MINI dealers share common facilities with the attached BMW franchise for parts, service, detailing, shipping/receiving, etc. The most obvious difference on the outside is the sales staff, showroom and outside lot. MINI does not have a big advertising budget (the cars sell themselves, and most of the 'advertising' that you see for the MINI seems to be aimed quite a bit at the existing owners). Most broad-range automakers 'lose' money on their small-car offerings and make it up in their mainstream and high-end product lines. Many people go back to their original dealer looking to 'trade up' after a while. Still more people coming in for a small car will often stray into the other product lines and 'upgrade' their purchase.
#19
11-03-2003, 11:18 AM
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>>Most of the MINI dealers share common facilities with the attached BMW franchise for parts, service, detailing, shipping/receiving, etc. The most obvious difference on the outside is the sales staff, showroom and outside lot. MINI does not have a big advertising budget (the cars sell themselves, and most of the 'advertising' that you see for the MINI seems to be aimed quite a bit at the existing owners). Most broad-range automakers 'lose' money on their small-car offerings and make it up in their mainstream and high-end product lines. Many people go back to their original dealer looking to 'trade up' after a while. Still more people coming in for a small car will often stray into the other product lines and 'upgrade' their purchase.
>>
Again...yes and no. MINI spends the same amount of money per car on advertising as BMW does. Each and every MINI dealership is a stand alone business and must make it or break it on it's own merit. Does MINI being attached to a BMW dealer lend itself to a possible upsell in the future, yes. Does that help the MINI dealer itself...not directly.
Yes, the parts departments and service bays are existing, but those costs aren't calculated into the numbers above. The tech's and training are though.
>>
Again...yes and no. MINI spends the same amount of money per car on advertising as BMW does. Each and every MINI dealership is a stand alone business and must make it or break it on it's own merit. Does MINI being attached to a BMW dealer lend itself to a possible upsell in the future, yes. Does that help the MINI dealer itself...not directly.
Yes, the parts departments and service bays are existing, but those costs aren't calculated into the numbers above. The tech's and training are though.
#21
11-03-2003, 11:39 AM
I think that most will be interested in this story, I was completely swallowed by it. Well written and informative.
Confessions of a Car Salesman
Pass it on, make a thread of it, whatever. Everyone should read it.
Confessions of a Car Salesman
Pass it on, make a thread of it, whatever. Everyone should read it.
#23
11-03-2003, 11:43 AM
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>>I think that most will be interested in this story, I was completely swallowed by it. Well written and informative.
>>
>>Confessions of a Car Salesman
>>
>>Pass it on, make a thread of it, whatever. Everyone should read it.
Read that myself, very entertaining if slanted.
>>
>>Confessions of a Car Salesman
>>
>>Pass it on, make a thread of it, whatever. Everyone should read it.
Read that myself, very entertaining if slanted.
#25
11-03-2003, 12:21 PM
I recall reading somewhere a BMW/MINI executive stating that the initial up-front investment they require of each MINI franchaise was in the neighborhood of $400,000, including setting up the showroom to their specs. The same guy in the same interview also stated that they estimated each MINI dealership made a profit of about 1 million dollars in the first year.....
I know I paid my dealer about $2600 more than what they paid for the car, but I think your estimate of $1900 per car is reasonable. (It may be location dependent; a large percentage of cars sold by my dealership are fully loaded -- I was surprised how many cars are NAV equipped, so that pumps up the profit) My dealer has sold 1000 cars up to MY 03, and they got more than 120 allocations for September. If this allocation level continues, they will have 1440 cars to sell for MY 04. 1440*$1900 = more than 2.7 million dollars. Even if I take the expenses out, I am pretty sure my dealer is doing pretty well.
MINIGuy, I assume you are a MA. I agree that MAs probably don't make that much. But I also think that the owners are making a pretty good return on their investment.
I know I paid my dealer about $2600 more than what they paid for the car, but I think your estimate of $1900 per car is reasonable. (It may be location dependent; a large percentage of cars sold by my dealership are fully loaded -- I was surprised how many cars are NAV equipped, so that pumps up the profit) My dealer has sold 1000 cars up to MY 03, and they got more than 120 allocations for September. If this allocation level continues, they will have 1440 cars to sell for MY 04. 1440*$1900 = more than 2.7 million dollars. Even if I take the expenses out, I am pretty sure my dealer is doing pretty well.
MINIGuy, I assume you are a MA. I agree that MAs probably don't make that much. But I also think that the owners are making a pretty good return on their investment.