In The Black: Smart Investments = ROI

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In The Black: Smart Investments = ROI

 

An old adage states that you have to spend money to make money. This much is true, and investments in the future of your business are necessary for growth. Companies that fail to invest in themselves often fold or stagnate, never growing to see their full potential. But investing in your own company, while vital, can be a nerve-wracking process.

While nothing is ever totally guaranteed in the investment world, there are steps you can take to maximize your potential for return. A lot of it is simple math, which no one likes to do, but in this scenario a little grade-school-level addition and subtraction can go a long way toward helping you make smart decisions with your marketing dollars.

What is the VALUE of a lead? How many dollars come in the door per new customer or client? Identifying the value of your leads is one of the key steps in making an informed decision toward investment in marketing and advertising. If your average customer spends $50 per month, and on average remains with you for six months, then the value of that lead is $300.

What is your CONVERSION RATE? If you draw 100 people to your site, and of those, typically 10 sign on as customers, then your conversion rate is 10%. For marketing efforts designed to drive traffic to your website, this figure is important to know. If your marketing partner drives 250 people to your site, and your conversion rate is 10%, then you’ll draw an average of 25 new customers or clients. If the average value of those customers is $300, as stated above, then your marketing efforts have returned $7,500.

How much RETURN are you seeing? If you are paying a marketing firm $4,000 per-month, then in this hypothetical scenario you’ve made a profit of $3,500! If you’re paying $8,000 per-month, then you’re in the negative by $500. Identical results from two different sources can make or break you depending on the level of investment you’ve made.

Yes, marketing efforts, website creation, and advertising are all vital investments that will allow a company to grow. However, you need to choose the plan that’s right for you. Don’t be afraid to tell someone that their price does not fit your business model. If the math does not add up, and the potential for return is nonexistent, then you’re setting yourself up for failure. Identify the value of your leads, discern your conversion rate, and use that to judge the potential for return on your investments.

While return is never guaranteed, understanding that the potential for it exists should set your mind at ease, and fill you with a sense of hope for the future of your business!

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