Every marketer likes to blog. Blogging is a great way to share your thoughts about marketing, branding, design issues and to hear your feedback and ideas. If you are not blogging yet then you need to be and if you are blogging but don’t see the benefits, then it’s time to re-evaluate your blogging strategy. Fortunately, there is a positive business return on the typical blogging investment, with plenty of evidence to back it up.
Does this mean that blogging has a business ROI (Return on Investment)? Could blogging simply be a means of keeping us occupied and self-satisfied — a massive exercise in existential navel plucking?
There are several methods for calculating your blog’s return on investment, all of which are dependent on your objectives. However, we’ve discovered one method for assessing if you’re obtaining the ROI you require, as well as what’s included in that calculation. Read on, and you’ll see how your blogging time, resources and investment can generate significant ROI that moves the needle for your business.
Return on investment (ROI) is a statistic for determining how profitable an investment is. To measure an investment’s efficiency, compare how much you paid for it to how much you earned. Let’s take a look at how it’s used by both individual investors and businesses.
What is ROI?
ROI (return on investment) is a key performance indicator (KPI) that is frequently used by organisations to measure the profitability of an investment. It’s particularly valuable for tracking progress over time and removing the element of guessing from future business decisions. Any organisation, regardless of size or industry, may benefit from knowing how to calculate return on investment.
After all, determining whether or not you’re getting your money’s worth is a fundamental idea that both individuals and businesses must grasp to boost — rather than impede — their financial success. You can better understand how well your firm is doing and which areas could use improvement to help you achieve your objectives by calculating ROI.
How to calculate ROI?
At first glance, calculating ROI appears to be simple. Simply divide your investment’s gains by the cost of your investment to get your answer as a percentage or ratio. If you compute a positive figure, you made a profit on your investment; if you calculate a negative number, you lost money. Let’s imagine you’re a mid-sized business that has opted to invest in new software to increase revenues. As a result, your ROI formula might look like this|
Here are two ways to represent this formula |
ROI = (Net Profit / Cost of Investment) x 100
ROI = (Present Value – Cost of Investment / Cost of Investment) x 100
Let’s say you invested $5,000 in the company XYZ last year, for example, and sold your shares for $5,500 this week. Here’s how you would calculate your ROI for this investment:
ROI = ($5,500 – $5,000 / $5,000) x 100
Your investment in firm XYZ would yield a 10% return. This basic example ignores capital gains taxes and other costs associated with buying or selling the shares, but a more realistic calculation would include these in the investment cost.
This is a simple formula that may be used in almost every corporate area, whether it’s human resources or marketing. However, calculating ROI is more complicated than a simple math equation. When evaluating ROI, other aspects that may be less evident, such as time, hidden costs and fees, and even emotional factors like stress, should be considered. All of these factors might have a substantial impact on your return on investment.
How to use ROI?
You can benefit from ROI calculations in a variety of ways. First and foremost, what is the most obvious? Understanding the impact of your investment on your company. It’s a no-brainer that something needs to change if you discover you’re spending money on an expense.
Regular investors can use ROI to examine their portfolios, and it can be used to evaluate nearly any form of expenditure.
ROI could be used by a business owner to determine the return on investment in advertising, for example. If $50,000 spent on advertising resulted in $750,000 in sales, the business owner would get a 1,400 percent return on investment. To make the best decision, a real estate owner considering new appliances could compare the ROI of two distinct renovation options, taking into account cost and future rent increases.
Just keep in mind that ROI is only as good as the figures you put into it, and it can’t take away risk or uncertainty. When using ROI to make future investment decisions, you must account for the possibility that your net profit estimates are overly optimistic or even pessimistic. And, just like any other investment, past performance is no guarantee of future success.
Many types of ROI, including but not limited to, can assist you in making key business decisions |
Purchasing a new tool |
Adding new tools, equipment, and goods to your business can be a good thing, but it’s important to do so prudently. Calculating the return on an investment in equipment allows you to determine how useful your new tool is and what types of equipment to invest in in the future.
Hiring new employees |
Is your new employee increasing or decreasing the profitability of your company? Tracking your employees’ return on investment will help you better identify the types of people you should hire (or fire).
Adding a new department |
Adding a new department to your firm, like hiring a new employee, can be a wise choice if it helps you raise earnings. Calculate return on investment to measure the profitability of your departments and uncover chances for expansion rather than guessing.
Sales strategies |
Is it possible that a specific tactic contributed to a sale? Tracking which sales methods produce the best results will help you figure out how to increase your company’s profitability.
What Is a Good ROI?
According to popular knowledge, a yearly return on investment in stocks of roughly 7% or greater is considered a decent return. This also refers to the S&P 500’s average annual return, adjusted for inflation. Because this is an average, your return may be higher or lower in some years than in others. However, general performance will level off at roughly this level.
However, rather than a simple benchmark, calculating the optimal ROI for your investment strategy takes considerable study. For example, the S&P 500 may not be suitable for the level of risk you’re willing to accept or the asset class you’re investing in. Ask yourself the following questions to determine the best ROI for you |
- How much risk can I afford to take on?
- What will happen if I lose the money I invest?
- How much profit do I need for this investment to take on the prospect of losing money?
- What else could I do with this money if I don’t make this investment?
Limitations of ROI
ROI isn’t without its downsides. First and foremost, ROI does not account for time. If one investment has a five-year ROI of 20% while another has a two-year ROI of 15%, the standard ROI calculation will not assist you to decide which investment is the better. This is because it does not account for compounding returns over time.
Annualized ROI can help avoid this limitation. To calculate annualized ROI, you need to employ a little bit of algebra. The value n in the superscript below is key, as it represents the number of years the investment is held.
Annualized ROI = {[1 + (Net Profit / Cost of Investment)] (1/n) – 1} x 100
If you bought a portfolio of securities worth $35,000, and five years later your portfolio was worth $41,000, you’d have earned an annualized ROI of 3.22%. The formula would look like this:
Annualized ROI = {[1 + (6,000 / 35,000)] (1/5) – 1} x 100 = 3.22%
Calculating an accurate ROI requires taking into account all costs, not just the investment’s initial cost. You must factor in transaction costs, taxes, maintenance costs, and other ancillary expenses in your estimates.
Finally, for investors, an ROI calculation that is based on predicted future values but does not contain any form of risk assessment can be problematic. High prospective ROIs are easy to be seduced by. However, the formula itself does not indicate the likelihood of such a return. This suggests that investors should proceed with caution.
ROI & Marketing
Furthermore, knowing how to calculate ROI is particularly useful for marketers. Marketing’s goal is to get the word out about your product or service, so your efforts have a direct impact on your sales success. You may use marketing return on investment calculations to see which efforts are yielding the best results for your company. For example, to promote an upcoming event that your company is organising, you may run both online and offline marketing. After the ads have run their course, you may calculate ROI to see which one produced the best results. Formula for each marketing ROI calculation may look something like |
(Revenue gained from registrations – cost of marketing campaign) / cost of marketing campaign
You can see right immediately which campaign got you the most return on your investment by associating event registration with your different campaigns, and you may build out that campaign for future events.
However, estimating marketing ROI may be more difficult than determining ROI for something more tangible, such as a new piece of equipment. When offline campaigns are included, the procedure becomes considerably more complicated. Fortunately, there are a variety of tools available to assist you in performing a more precise marketing ROI study.
Google Analytics/ Ads | Marketers that wish to track the performance of their organic traffic and online ads should use Google Analytics and Ads (previously Adwords). You can assess the success of your efforts and make necessary adjustments to increase profitability by obtaining and analysing data about your digital audience.
CRM software | CRM software, such as HubSpot, assists businesses in maintaining healthy customer relationships by streamlining interactions and collecting vital customer data. The data acquired through your preferred platform can assist you in determining which marketing and sales methods are most effective for your company.
Call tracking | Call monitoring software employs online and offline campaign tracking to assist you to figure out which campaigns are generating phone calls and conversions, so you can adjust your approach accordingly.
Using marketing ROI to your advantage
Calculating your marketing ROI gives you valuable insight that you can use to advance your marketing strategy. These are just a few things you’ll learn by measuring your marketing ROI |
Where to spend your money | The most obvious insight you’ll obtain from calculating marketing ROI is where you should spend your money. You can better manage your expenditures according to what works for your organisation if you notice that one element of your marketing plan isn’t providing much of an ROI.
How to pivot your marketing strategy | Similarly, calculating marketing ROI can help you adjust your strategy according to customer behaviour. You don’t necessarily have to focus on revenue, either — for example, if you’re trying to boost your social media following, you can calculate ROI to determine the success of your efforts.
Which tools to use to help your marketing succeed | If one marketing tool helps your firm become more profitable, you’ll feel comfortable spending your marketing dollars (and time!) there.
Summing-up
The return on investment (ROI) is a simple and straightforward metric for measuring the effectiveness of a given investment. This frequently used method allows you to compare investment possibilities on an apples-to-apples basis.
However, because ROI does not account for risk or time horizon, and it necessitates an exact measurement of all expenditures, it cannot be the only indicator investors use to make decisions. When analysing an investment, ROI is a good place to start, but don’t stop there.
Almost every business decision requires knowledge of ROI. If you’re not sure whether or not your efforts are yielding results, how can you properly optimize profitability? Understanding the importance of ROI is crucial for any business to succeed. If you need help in understanding how much return on investment, you’re making in comparison to last year or after you changed your marketing strategy and you are not sure whom to trust with your financial data talk to us. Shergroup’s digital marketing solutions are the answer to all your questions. Our experts can dive deep into your metrics, find out what’s working and what needs to change, analyse and prepare understandable reports to inform you from time to time about the growth of your ROI. If this strikes a chord give us a call and let’s get your ROI moving NORTH.
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