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3 Financial Tools to Improve ROI

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How to Measure and Maximize Your ROI (Return on Investment)

By Shane Bender

Imagine that you are about to take a road trip. You map out the directions through your favorite mapping application and estimate how long it will take. You determine the cash needed for the journey. Once everything is in order you embark on the trip. As you are driving, you come across a road closure, so you look at the map to determine a new way to get to your destination. While driving, you regularly look at the speedometer to ensure you are making the best time possible without getting a speeding ticket. In the distance, you see dark clouds. After checking the weather, you travel into a thunderstorm and adjust your driving accordingly to be safe. If you are like my family, right when you start making good driving time, someone needs to go to the restroom, so you have to stop. All the time, the mapping application constantly readjusts your time of arrival based on all the variables.

Successful Business Vs. Enjoyable Road Trip

Successful businesses operate in a very similar way. They have a vision and long-term goal to achieve financially. These businesses develop a financial plan that maps how they are going to get to their destination and the money they need. They have a regular dashboard to determine how they are performing and make adjustments when necessary.  They run into employee (passenger) issues that need to be adjusted. The storms of the economy or competition can slow them down, but they make adjustments. They can’t drive too fast because they might crash, or drive too slow, as this is also dangerous.

I could continue with this analogy, but you get the point. In summary, there are 3 important steps any business should take. This applies to businesses and even nonprofits of all sizes. Even specific projects or products should follow a similar approach.

1. The Business Destination

There has to be a financial vision or goal. Do you know your destination and whether you are going to end up in the right place?

I have created the Return on Investment (ROI) Predictor to help you make sure your business or project is headed to the destination you desire. Download the ROI Predictor by clicking below.

2. Dashboard

It is essential that you know the speed and direction you are heading. Below are some blogs I have written that I think will be helpful to you.

Track Yourself to Freedom – How the benefits of tracking can help your business eliminate waste, improve prioritization, increase motivation, enhance focus, and grow your cash.

Keeping Score – Why KPI’s (Key Performance Indicators)? – KPIs help with measuring goals, managing time, boosting morale, and helping keep your business out of trouble.

5 Reasons Why a Church Dashboard is Essential – Don’t think that a dashboard is only for businesses. Even a Nonprofit should have a dashboard to measure how they are doing toward their missional goals.

3. The Business Forecast

As conditions of your business change, a forecast is your roadmap to your destination. In any business that I have helped both as an employee and a consultant, I started with a working business plan or forecast. As actual revenue, expenses, and cash flow changes, so does the forecast. Think of it as the extended weather forecast for your business. When you get closer to your destination, variables change and get more accurate. Below are some helpful articles that can assist you in building this forecast.

It All Starts With RevenuePractical tips to help you forecast revenue from both existing and new clients and products.

How Profitable Will You Be – Tips on forecasting Cost of Goods/Services, personnel costs, and operating expenses.

Where is Your Cash Going – Cashflow is important for any business. This article tells you common places it goes but can’t be found on the Income Statment (Profit/Loss Statement).

Conclusion

You are on a business road trip. If you haven’t done the above, it is not too late. There is always time to set your destination, look at your dashboard, and build a workable business forecast to reach your goals. It will give you peace of mind, cash flow growth, and even simplify your focus on what is most important.