Do you know what ROI is and how is it applied?

The ROI indicator, known by its acronym in English ‘Return On Investment’, offers the possibility of analyzing the percentage of profitability that has been achieved in relation to the resources invested. This is the key to evaluate the efficiency of each euro or dollar invested, for example. In this way, you can know how much money you are winning or losing with each action in any business.

In essence, the ROI is a metric useful in business decision-making and in the evaluation of all types of projects. What is the purpose of these measurements? Maximize the value generated taking into account the resources used. Advances in financial and strategic support in the vision given by this parameter. It is used as a tool that allows you to understand the results, both immediate and more long-term, in various areas of a business.

In short, the ROI represents the relationship between the net profit obtained and the total cost of the investment, expressed as a percentage. A positive ROI, shows that the benefits outweigh the costs, while a ROI negative points to the contrary. Constantly evaluate the quality of the processes driving the continuous improvement.

In the Marketing and Advertising Certificate of Higher Education distance learning and in the Transport and Logistics Certificate of Higher Education distance learning you will learn how to measure the impact of the strategies developed using metrics such as ROI. In these official qualifications you will understand perfectly how they move and flow in the markets!

The calculations of the return on investment in any matters can become complex. You have to take into account multiple variables, both on the side of the benefits of the investment or the cost. Below, we break down the entire process so that you know how to determine the ROI of the easiest way.

·Step 1: Define the objectives

Set concrete goals. It clearly defines the goals and results that you expect to get prior to calculating the ROI. This will be useful to detect the elements required to execute any strategy.

·Step 2: Collect related data

Identifies the cost of each investment, and measured their associated revenue. In terms of costs, keep in mind that there are direct and indirect costs. In regard to the income, consider the tangible benefits are quantifiable and intangible.

·Step 3: Apply the formula for ROI

The next step is to apply the formula for ROI. Take note!

The result you'll get will be a percentage. The net earnings refers to income earned after subtracting costs of investment. As we've just said, the fact multiply the result by 100; that is, convert the fraction into a percentage, it facilitates the interpretation and comparison of results.

·Step 4: Evaluation of results and continuous adjustments

We share some examples for you you can interpret the results at a glance. A ROI of 100 % reflects that the investment is fully recovered. A positive ROI, shows that the investment has been profitable. On the contrary, an ROI that is negative indicates that there has been loss in that action. ¡However, the precise interpretation of the results depends on the given context and the objectives set! Compare the ROI of different strategies will allow you to identify that they have a superior performance and make decisions effectively.

To adjust the return on investment is one of the most important challenges in all kinds of sectors. The main reason is the optimization of resources! With the large increase of the competition in all industries, the ROI is a key factor to control the results and implement programs of continuous improvement. It is an indicator essentially financial, but can be adapted to other contexts. Here, we share some examples so you can get an idea of your application in various environments:

– Financial ROI. Is the metric more than usual. Focuses on calculating the returns on financial investments.

– ROI of social. Measures beyond economic benefits. Evaluates the social impact of different actions.

– ROI in the reputation. The ROI of brand examines how investments impact on the perception and position in the market of a company.

– ROI on innovation. Aims to calculate how the progress and update of resources affect the relevance of a business.

Using the ROI, adapted to each area of interest, we can determine the benefits of each of the actions they are run. This indicator can be known for a period of time variable. This metric allows companies to work on the viability of the projects. Helps to plan the growth effectively, to meet the expectations of the clients and identify opportunities. Everything can be measured and it is necessary to verify that objectives are being met and, in consequence, to analyze and adjust approaches!