How to calculate your company’s return on investment

Anyone who deals with administration and business is used to the nomenclature: return on investment, ROI (in English Return on Investment), rate of return and rate of profit. in one simplified analysis, all of these terms deal with the same relationship between profit and investment that drives a large part of the decisions in the world of entrepreneurship. Finally,how to calculate this value and why it disrupts the continuity of your new andcompany? We’ll break these answers down into a simple, straightforward approach. meet him

Analytics are important for business continuity

For Jack Phillips, author of the book ROI – How to Measure Return on Investment, dealing with the future requires surrounding yourself with processes that guarantee performance. “Organizations need a structured and systematized process that enables and enables the evaluation of the project management process and the respective business results and which acts not only as a measuring tool, but above all as a measuring tool Continuous improvement toolexplains Phillips. Also the analysis of return on investment, if conducted on average and long-term perspectives, allows partners and entrepreneurs to change corporate strategy and adjust the business model. With the present result, it is possible to measure, for example, whether an increase in investment is worthwhile and whether the current model yields a constant return. When used well, the tool shows a lot about the situation of the company in general – as simple as the calculation is.

How to calculate the return on investment

The return on investment can be calculated without having to resort to financial mathematics and impressive formulas Division of corporate profits – related to a certain period of time – for the value of the initial investment for commercial buildings. The result is the return percentage.

In this way, if your business generates a monthly profit of R$ 2,000 and you have invested R$ 80,000, the rate is 2.5% per month. Ideally, to be truly profitable, this interest rate exceeds two or three times the return that can be obtained from other investments such as retirement funds or savings due to the lack of liquidity and the risk being much higher. As we have seen, calculating the return on investment after making a profit is quite simple. Therein lies the difficulty project this value and find out in the present if the investment is worth it medium or long term. In order to create this calculation, information on three parameters is required: current investments, expected earnings growth rate and the rate of return used for the calculation. Therefore, it is necessary to keep in mind how much the company will grow in the coming years, what value will be invested and what changes can be expected in the organization’s market. It’s easy, isn’t it?

Return on investment can attract investors

Having these answers is every entrepreneur’s dream: with the information at hand, it’s possible Adjust planning Y achieve viable growth. So it may be worth investing in one. consulting firm calculate the expected return on investment for the future professionally and regularly using specific financial criteria. Also because this data attracts investors and motivates partners. “Today, clients – particularly those funding the project – require critical appraisal data. Measuring ROI can be a valuable tool to communicate a project’s positive impact on the organization,” summarizes Phillips.