Return On Investment

A business term that measures the revenue a company generates from an investment, such as a particular marketing program. To calculate ROI, you need to find out the total financial benefit derived from a particular program and then compare that with the full cost of the program (including the less-obvious expenses). ROI is based on tangible benefits (bottom-line increases in revenue or decreases in expense) and intangible benefits (emotional or time improvements). Make two columns and list all of the tangible and intangible benefits of your proposed program. Associate a hard dollar value to each benefit and add these up (make sure your dollar values are based on a proven formula). Then deduct the sum of your total operating expenses from the sum of your benefits. If it is a positive number, you have a "true ROI." If it is a negative number, it may not make financial sense to pursue that particular program.

See also : ROE  
NetLingo Classification: Online Business