Calculating ROI involves different choices, depending on a company’s overall goals and what kind of investment you have in mind. But regardless of how you choose to define it, there may be times when you don’t see the return you hoped for.
Here are 6 ways to help improve ROI for your business.
1. Define Your Goals
As we said, the term “return” in ROI can mean different things. If you want to improve your ROI, you need to arrive at a clear grasp of your goals and what the word means to your operations.
Return could mean any of the following:
- Increased revenue
- Larger profit margins
- Reduction in overhead
- Higher retention of employees
- Improved customer relations
- Heightened brand awareness
This is not to say that when you define what return means to your firm that it might not have a trickle-down effect toward other goals you have in mind. For instance, if you want to enjoy larger profit margins and you succeed at this, it’s entirely possible you’ll also see a reduction in overhead or production costs.
2. Know Where Your ROI is Coming From
Once you have a clear set of goals in terms of ROI, you have to find ways to track and measure them. This means you’ll have to know where your ROI is coming from.
For example, gaining ROI from a maintenance system might mean you’ll want to assess the cost-benefit for employee gains which may not be quantifiable. You might have to set a dollar amount associated with the benefit to measure its ROI properly.
You have to know where your ROI is coming from so you have a clear way to track it.
3. Assess Your Current Return
Before you’re able to fix something, you have to know the precise location of the errors. Knowing what your current return is should enable you to start working backward to address what isn’t working.
Plus, this will give you a steady benchmark to compare, as you make adjustments for future return goals.
4. Find Ways to Reduce Costs
It’s no surprise that to achieve a higher return, you have to make more money and spend less. A fundamental piece of increasing ROI involves looking for ways to reduce costs in your company’s operations.
Are there ways to automate some of the activity that could reduce the number of employees you need? Do you have any machinery that’s outdated and wasting some of your employees’ time and financial resources unnecessarily?
Start by looking at two crucial points: overhead and production. Overhead is anything that’s not related to production, and might include things like office space or utility bills. Production refers to all the labor, materials, and equipment required to get the job done.
5. Look to Increase Revenue
On the flip side, you’ll also need to spend some time and energy identifying ways to increase your company’s revenue stream. You’ll have to work closely with your sales and marketing departments to develop new strategies for generating leads or closing more clients.
See whether there’s room to increase the price of your products or services without deterring new clients from making a purchase. Eventually, if you’re still not making enough money, you’re going to have to shift away from your current business practices and start trying new approaches.
6. Evaluate Company Culture
One of the biggest financial burdens a company carries, often without even realizing it, is lack of productivity from the employees. This is usually an expression of the company culture as a whole.
Creating an inclusive, positive work environment that provides the right tools and resources for its workers can inspire a massive shift in productivity. In turn, you’ll save your company thousands of dollars in time that’s no longer lost.
Increasing your ROI entails a multi-step process. It’s not just about trying to make more money by selling more of your products. It means reassessing your entire business model.
This may require you to work with your business development team to revisit your initial business plan, and find out what adjustments may have to be made.