ROI Basics for Hispanic Businesses
Understanding how return on investment drives your Hispanic small business is vital in todays social media driven competitive environment
As a Hispanic business owner, you have no doubt heard the term return on investment (ROI). You likely have a basic understanding of what ROI measures and why it might be important to your business. However, it’s vital to understand that the role of ROI in small businesses has changed significantly over the past decade with the increased use of Internet-based technologies such as social media sites.
Understanding ROI
When you launch a marketing campaign or start a new business, you make an investment. Getting ahead in the world of business requires that you make profits on your investment or that you enjoy a high ROI. In general, the higher the ROI, the more successful your business. To understand ROI, think of the base figures. If your project sees an ROI of 100 percent, that simply means that you made exactly as much money as you put into the project. While there’s no shame in breaking even, an ROI of 100 percent won’t help your business grow.
On the other hand, an ROI of 200 percent would indicate that you recovered your investment and made profit over and above that investment. If you invested $1,000 in a marketing campaign for a product and have sold $2,000 worth of product, you’ve reached 200 percent ROI. Because tracking ROI data can be difficult, many Latino entrepreneurs prefer using analytics software and apps that can help calculate ROI measures.
Calculating ROI
To succeed in a competitive business environment, Latino businesses must have a strong grasp of their overall growth trajectories. Learning how to calculate ROI is one way to understand the growth of your business. While many software programs will take care of these calculations for you, it’s still a good idea to understand how to complete a basic ROI calculation on your own.
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Before you can calculate ROI, you’ll need accurate figures that represent your total investment in starting your business or launching a new ad campaign. Next, you’ll need to gather data about the net profits brought in by your business during a certain time period. If you’re calculating ROI for a start-up, use a one-year time period.
If you’re calculating ROI for a marketing campaign, look at profits for the duration of the campaign. You will divide your total investment by your next profits to discover the basic ROI. For example, if you invested $500,000 in starting your business and earned $100,000 during your first year in operation, your ROI calculation would yield a result of 0.20 or 20 percent.
