Do you own a small business? Maybe you’re thinking of starting a small business and want to learn how to get the most for your money? Perhaps your business is not getting the ROI or Return On Investment it needs?
Either way, boosting your bottom line is the key to any business and its success. By doing so, you’ll free yourself up to invest more, which means more profits when done correctly.
As of 2020, there are 30.2 million registered small businesses in the United States and only half of them will survive five years or more. Keep reading if you have any interest in having a successful business and making money.
What is ROI?
ROI is a performance metric that is used to calculate the efficiency of your investment. In layman’s terms, it means what you get back on what you put in.
Percentage of ROI
To calculate your ROI, you need to use a formula. The formula inputs the current investment value minus the investment cost and calculates it into your ROI percentage.
Say you invest $2,000, and the value of your current investment hits $3000. Your percentage of ROI is 50%. In other words, your net profit on your investment is $1,000.
Why Is It Important to Calculate ROI?
When you calculate ROI as a ratio or percentage, you can compare it to other investments more easily. You can use other factors, but this formula is the most basic and straightforward.
This helps you quickly figure out what’s working and what’s not. What’s worth your time and money, and what investments aren’t pulling their weight.
In the end, you need to understand what your desired outcome is and pinpoint the KPI (Key Performance Indicators)
Different Variations of ROI
Most investments are made solely for profit. However, there are other types of investments that you may need to calculate the ROI for.
Investments such as those in the energy or environmental field. The ROI of those would be in reduced waste or cutting electric usage.
Another type of investment is customer loyalty programs. You measure the ROI for those in clicks or email open rates. You measure these factors against the amount of money you spent on marketing.
There’s also an incentive program ROI. This one becomes a little more complicated, but you can learn more about ROI here.
Now that you’ve learned the technical parts of ROI let’s talk about the other end of the spectrum, creativity. Some of the most successful marketers come from the creative world.
The most successful ones learn how to push the envelop and understand how to make all of their past creative experiences fit their business plan.
This, in turn, creates a greater ROI. If don’t come from this background take steps to become more creative.
Time To Get That Money
Now that you’re versed in the world of ROI, it’s time to put it into practice and go get some money. Whether you’re a new small business entrepreneur, a grizzled veteran looking to shake things up, or someone considering a new startup, ROI is where it’s at.
Make sure you take a look at our Investment section for more great knowledge.