Has your banker, accountant, or a small business guru asked about your ROI?
Are you already making a good income and don’t see a need to calculate your ROI?
Do you feel like it’s just too complicated or time-consuming?
Most small business owners and entrepreneurs want a reason for doing additional work or analysis. Time is a valuable commodity, and there’s no point in spending it on a bunch of numbers or analysis that won’t add to the bottom line. I agree 100%. This article will quickly and concisely define ROI, delineate how it will grow your profits, and explain how to calculate it.
Defining ROI (Return on Investment)
Wikipedia defines ROI as the “ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.” Scrape away all the finance mumbo jumbo, and ROI is just the money you earn (or lose!) on the money you have invested expressed as a percentage.
Think of it as your profit target. For example, you want to earn at least 10% on the investment into your business. That means when you calculate your ROI it should be at least 10% or you will not hit your profit goals.
How ROI (Return on Investment) Will Grow Your Profits
Managing Capital – An Objective Evaluation Tool
Every entrepreneur knows that capital is a minimal resource, therefore one that you want to spend very carefully. Most business owners intuitively know their minimum return requirements. We’ll use 15% for illustration purposes. Let’s face it; if you only required a 2% return on your money, you would be buying Treasuries, or CD’s, not running a small business.
When you are considering a new venture, launching a new product, or offering a new service first look at your ROI. If your best case scenario only gives you 5%, don’t do it! Yes, I know you think it’s a sexy idea, or everyone will want to hire you. The reality is you will be working for 5%, does that sound like a good idea?
Bottom line – no investment should be made that does not meet your ROI Threshold.
Choosing Between Different Options
You know you need to launch a social media campaign to survive, much less thrive. You can’t afford to buy all the tools or services that exist. You’ve narrowed it down to reputable companies and proven products. How do you choose the right one? Calculate the ROI for each, and select the highest ROI. If you only have $100 to spend, wouldn’t you instead get back $130 than $110?
Make it Better – Before You Spend!
Even if you are hitting your minimum ROI, you may be able to make more. Also if you are an established company, you may discover your biggest seller doesn’t meet the ROI Threshold. What to do?
Review your key drivers, and consider what could be improved. Modify the numbers and review the results. Any changes you make need to be realistic. Saying you can magically reduce expenses by 50% without a plan won’t make it happen. Then implement and track.
Of course, it never hurts to have your ROI handy next time you speak with your banker, investor, spouse…
How to Calculate Your ROI (Return on Investment)
(Gain from Investment – Cost of Investment)? (Cost of Investment)
Gain from Investment includes any profits earned, interest, dividends, as well as the sale of an asset whose purchase price was involved in the Cost of Investments. but the right investment is not only a matter of how we take our investment return, but we need to consider how we manage the funds again. if not, start the correction from the beginning, is our investment target, right? open the ICO List and consider again, what do you think is right. then try taking different steps for maximum results.
Cost of Investment includes personnel, marketing, purchase of assets, sales commissions and other expense directly tied to achieving your final Investment Value.
Yes, it’s that easy. Of course, you are welcome to use our FREE ROI tool at