ROI or return on investment- every business analyzes its future by identifying past and potential financial returns. ROI is a ratio of your company`s net profit compared to your financial investment in the business.
What is ROI or Return on Investment?
Many people often confuse this term with the profit margin. However, ROI is the financial return that you receive from spending money and not the profit received from the sale of goods and services. It helps the leaders to make informed decisions by kicking the guesswork out of the window.
Why is it Important?
The ability to calculate return on investment is crucial for every business, regardless of the company`s size or industry. A businessman is considered smart if he manages his expenses and monitor ROI regularly. Only businesses that can analyze ROI, survive in the long run.
So how can you improve your business`s ROI? How can you ensure that your business`s ROI is always increasing, no matter what? Watch, which type of business model can guarantee high ROI and regular 6 figure income, here.
Here are three ways that will help any business to receive higher ROI in every season:
- Choose a Business Plan with Zero Inventory Management
If you have a small business that stores goods in a warehouse, then managing inventory is an essential part of how you can control your stock. Inventory management is like storing ice. Once you have kept ice inside the warehouse, it will meltdown to the water and will drown your profits under it, if you do not manage your stock smartly.
As the time of the stock increases, its shelf-life, as well as the price, starts to decrease. For instance, electronic devices and gadgets experience a price drop as soon as the new model with upgraded technology is launched. From perishable to non-perishable items, the value of stock starts decreasing if the goods stay in the warehouse for a longer duration.
Hence, it is best to order those goods that are popular and have numerous takers in the market. You can also pick a business plan that does not require you to stock up goods in a warehouse. E.g.- online business courses. Online courses neither require you to spend heavily on warehouse and inventory management nor go out of demand.
- Giving Discounts may Decrease Profit
Most often than not, many business owners purchase inventory from the distributors and lend it to the market on credit. This technique only results in loss- loss of inventory and loss of return. Why? The reason is that you purchase the stock after making the payment in advance to the distributor. However, when you gave the stock on a credit basis with receiving the down payment, you will be deprived of the funds.
Hence, you will have to offer your stock or products at a discount that will eventually hit your profit margin. Always choose a business model where once you sell a product, you get your money back. You can become a franchisee of Bada Business to earn profits every week.
Whether you have a commodity business, retail store, mobile retailer, or have a restaurant business, the profit margin is limited to 10%. However, the margin is not fixed and may hit by external circumstances like an increase in cost, wastage of inventory, expensive credit that can convert profit into a loss.
Thus, if you are an entrepreneur who is looking to set up an independent business, always select a business model that returns high ROI. For instance, a Bada Business Franchise Partner enjoys 20% to 50% of profit margin, without experience undercutting system, with fixed price.
If you are looking for simple and effective ways to improve ROI on your business, you can take our Problem Solving courses that are designed to cater the modern-day entrepreneurs with practical solutions to business challenges.
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