ROI (Return on Investment)
ROI: The metric every leader needs to understand to demonstrate value
ROI (Return on Investment) is a metric that measures the profitability of an investment. It's calculated by dividing the profit obtained by the cost of the investment. A positive ROI means you earned more than you invested; a negative ROI means loss. It's the universal metric for justifying business decisions.
How to talk about ROI without sounding too technical?
Instead of saying 'It was a good investment', say: 'The ROI of this campaign was 300%: for every dollar invested, we earned three'. Or: 'We need to calculate the ROI before approving this project'.
Real examples
Justifying an expense
“If we invest $10,000 in this tool and it saves us 30 hours per month, the ROI is clear in less than 6 months.”
Presenting campaign results
“The campaign had a 450% ROI: we invested $5,000 and generated $22,500 in sales.”
In a budget meeting
“Before approving this project, we need to see a projected ROI analysis for the first year.”
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