Maximise your success
an introduction to return on investment (RoI)
In the business world, the term “return on investment” (RoI) is at the centre of strategic decisions. This blog post takes you through the basics of RoI, explains how to calculate it, where your RoI should be, what a high or negative RoI means for your business and how DocBits can help you increase your RoI.
What is RoI simply explained?
RoI, or return on investment, is a metric that measures the financial success or failure of an investment. In simple terms, RoI shows how much profit or loss an investment generates compared to its costs. This metric is crucial to ensure that the investments made are profitable for a company.
How do you calculate RoI?
Let’s say you own a small e-commerce business and decide to run a marketing campaign to increase brand awareness and boost sales. Here is an example of how to calculate the return on investment (RoI) for this marketing campaign:
Step 1: Determine investment costs
You invest in the marketing campaign, including adverts, social media promotion and influencer marketing. The total costs amount to 10,000 euros.
Step 2: Determine profit
The marketing efforts increase your turnover by 30,000 euros. After taking into account production costs, shipping costs and other variable expenses, the net profit from the campaign is 15,000 euros.
Step 3: Calculate return on investment
The RoI formula is as follows:
Insert the values:
RoI=( 15.000Euro-10.000Euro )×100=50%
10,000euros
Result:
The RoI for your marketing campaign is 50%. This means that you have realised a profit of 0.50 euros for every invested unit of 1 euro. A positive RoI indicates that your marketing efforts were successful and the investment was worthwhile.
This example illustrates how companies can use ROI to evaluate the effectiveness of their investments and ensure that they have a positive impact on business success. It is performed using the following formula:
Where should the RoI be?
The optimum return on investment depends on the industry and varies depending on the company and type of investment. In general, however, the aim is to achieve a positive RoI. For example, an ROI of 10% means that 10% profit was realised for every unit of currency invested.
What does a high or negative RoI mean?
A high return on investment is an indicator of a successful investment. It shows that the return exceeds the costs and the company is making a profit. A negative RoI, on the other hand, signals that the investment has caused losses. It is important to note that a negative RoI is not necessarily bad – it can also serve as a learning opportunity and influence future decisions.
Increase your RoI with DocBits
To improve your ROI and optimise your business processes, we would like to introduce you to DocBits – an intelligent software solution developed by FELLOWPRO AG. DocBits uses artificial intelligence to revolutionise document processing. This innovative technology helps companies to increase their efficiency and maximise their return on investment.
By automating routine tasks, recognising patterns and processing large amounts of data quickly, DocBits offers a time-saving and cost-efficient solution. Discover the benefits of DocBits and increase your ROI through optimised document processing.
Conclusion
Return on investment is more than just a key figure – it is a key indicator of business success. By understanding and optimising your RoI, you lay the foundation for profitable investment and long-term growth.
Use the insights in this article to optimise your investments and take your business to the next level.
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