Episode 060 – Spending for an ROI
Every dollar you spend in your business should provide you with a return greater than what you spent. Today we dive into the concept of return on investment (ROI) as it relates to your business expenses. And just to keep it real, we turn a brain fart into brain fluff, lol! Are you spending just to spend? Are you spending to impress “others”? Not sure if the money you are spending is providing a return to you and your business? Today’s episode may just be the swift kick in the pants you need to make sure every dollar you spend benefits your bottom line. Not sure how to calculate ROI? Here is the quick formula. ROI = (Net Return / Cost of Investment) x 100 Example: You are considering investing in a $150,000 piece of equipment as a new service offering in your business. You anticipate the demand for this new service to be 15 services per month at $500 each ($7,500 revenue). If you finance the equipment, the monthly loan payment would be $2,500. You will need to pay an employee for 1 hour each service at a total hourly rate of $20/hr (15 x 20 = $300). Step 1 – calculate net return = total revenue – total expenses Net Return = $7,500 - $2,500 - $300 = $4,700 Step 2: Divide the net return by the cost of the investment, and multiply that number by 100. ROI = ($4,700 / $2,800) x 100 = 167% A 167% ROI is a positive return on investment and is in fact a fantastic return. Remember that ROI is not always about the dollar. Other types of ROI could include greater efficiency, time improvement, or employee moral improvement. At the end of the day, our goal is to help you keep more money in your pocket to reward you for all the time and love you pour into your business and the risks you take on to build it. **** If you need support on improving your business’ ROI, reach out, we are here to help! Contact us at https://procenac.com/contact/ (https://procenac.com/contact/) Or DM us on Instragram or Facebook @procenac