Gauge the Profitability of Your Investment
Return on Investment (ROI) calculation is a very popular and time tested metric which is used to evaluate profit from an investment and also to compare returns on different investments, so that one can judge which option would give the maximum return.
Although you don’t need to go into the nitty-gritty of accurate ROI calculation, learning the formula for basic ROI calculation should suffice. For calculating ROI, divide the benefit of an investment (net profit) by the total cost of investment.
ROI = (Gain from Investment – Cost of Investment)
Cost of Investment
The result is usually expressed in the form of percentage, by multiplying the quotient by 100. One reason for the popularity of ROI for return calculation, is because it is really simple to calculate and gives a good idea about how good a plan will work.
The organisation must aim at a positive ROI; moreover they should analyse all present opportunities and invest in the ones which give maximum ROI. One important thing that you should keep in mind to aim for maximum profit is that, your investment is not just the money but it is also the time and human resources. Include the value of hours at minimum wage and the money invested in HR. A lot of people are not aware of their actual investment in business and hence their calculated net profit is far from what it should be. This in turn skews up ROI calculation too.
Do the basic ROI calculation now, and you will be able to see the whole picture. If the scenario doesn’t look too good, don’t get discouraged. Think of ways to turn the picture around for maximum returns, which will ensure you success in the long run.
Now, are you interested in learning the secret of turning your basic ROI calculations into the key to your success?
When you start up your site, for a business, online or offline, all your plans and strategies are nothing but a calculated guess, a gamble where you try to minimise the chances of losing. ROI is an important tool which lets you do the same.
Calculating ROI at regular intervals is crucial to understand the results you achieve in your business. Be honest to yourself, and don’t try to portray your ROI more than it actually is. ROI measurements will act like a guide for you and help you to progress in a pre-planned manner.