What does return on investment (ROI) mean to a business? How can businesses grow and learn by calculating their ROI? Every business is looking for growth and that’s only possible when the parameters of their successes and failures are known. This is why understanding how to calculate ROI is essential to any business owner. Here’s how to make ROI simple and easy to implement.
Why is it important for businesses to calculate ROI?
ROI is another tactic to understand how a business is performing like data tracking, analytics, and key performance indicators (KPIs) do. The more the ins and outs of a business are understood, the more owners and employees can understand what changes to implement to see growth.
ROI is the calculation that determines how an investment is performing. The calculator produces a percentage that shows how profitable the business is. This calculation can be applied to separate assets in a business, not only its revenue as a whole. That means individual aspects of a company can be analyzed and determined to be either valuable to the business or detrimental.
To calculate ROI highlights potential opportunities for businesses. Based on assets that are performing well, owners can see what strategies could benefit them in the future. This is important for businesses at any stage, from small businesses to large enterprises. Being in the know offers insights for growth.
The benefits of using an ROI calculator
1. Ease of use
Instead of calculating by hand, using Excel, or any other program not meant for ROI calculation, use an ROI calculator. This tool is made for this purpose. All there is to do is input a couple of numbers to produce a percentage (more on that later). And the numbers are all already available in a business that keeps track of its revenue.
2. Measures profitability
ROI calculators generate a percentage that represents how profitable the business is. The higher the percentage, the more profitable a business. Most businesses see a percentage of five to twelve percent, which is good. It’s possible to have a negative number. But any of these numbers are informative.
3. Enables comparative analysis
Because businesses can calculate ROI for different parts of the business, the results of an ROI calculator can compare how well various projects perform to determine which ones should be dropped and which ones should be pursued. This kind of information helps whittle down resources so that what’s left are only things benefiting the business.
4. Achieves goal congruence
If different teams calculate ROI, the whole can ensure goals are on track. This information aligns the smaller goals of each team to fit alongside the business’s overarching goal. Understanding how a project is progressing allows teams to make decisions along the way to stay on track.
How to calculate ROI with bant.io
To calculate ROI, divide the net investment gain by the cost of investment then multiply that number by 100 to generate the percentage.
- The net investment gain is the net return from an investment after considering the costs put into it.
- The cost of investment is how much money has been put into that investment.
- What’s left is the percentage of that investment that is returned to the investor.
- If the percentage is positive, the return exceeds the total cost. If the percentage is negative, the investment is generating a loss.
That’s how to calculate ROI but to make all of this easier, bant.io has taken the work out of it. We have a free, super easy-to-use ROI calculator so you can see insights into your company to achieve business growth. Schedule a personalized demo with one of our consultants and discover how bant.io can help you reach your sales goals. Request a demo today.