I have a problem with too much money. I can’t reinvest it fast enough, and because I reinvest it, more money comes in. Yes, the rich do get richer.
ROI, return on investment. The concept is easy to understand. The first time you heard the term you likely nodded your head in agreement in that sort of way that shows you know how obvious ROI is. But how much have you really taken those three letters and made them part of your business? How much has the ROI mindset been ingrained in you to lead to success in both business and life?
The lesson of ROI is one I admit to taking a long time to learn and one I still learn and struggle with at times. I think for many of us the hard part in developing the ROI mindset is that we focus on the ‘I’ instead of the entire ROI.
It’s much easier to see what the investment is than it is to understand what the return might be. Investment is the known quantity. Return is unknown until after we’ve made the investment.
Look Beyond The Cost Of Investment
How many times have you heard someone say or even thought yourself that you didn’t have enough money to invest in something like AdWords? You know how much money you have in your budget and think you simply can’t part with $200 this month. What if you knew that $200 was guaranteed to bring back $300 in profit? Wouldn’t you find a way to get that $200 to invest?
The truth is many of us don’t invest, because there is no guarantee on the return. We’re afraid our investment will result in no return. at all If you spend $200 a month on AdWords for six months and each month you realized a $300 return, you’d find it an easy decision to invest again in month number seven. But before you can get to month seven you have to take a chance on month number one.
When the focus is on the investment the tendency is make decisions that lead to spending less. That only results in less investment, which leads to less potential return. I’m not suggesting that the way to succeed is to start spending everything you have, but rather to look at most of the things you do in terms of return on investment and develop an ROI mindset.
ROI Is About More Than Money
One of the best investments you can make is investing in yourself. If you’ve seen my monthly roundup posts you know I read a lot. Reading is an investment of my time that leads to a return in greater knowledge
Years ago, while I was still working 9-5, I I knew I didn’t want to be working 9-5. I’d work all day, come home feeling tired and drained, make some dinner, watch a little tv, and next thing I knew it was time to go to sleep and start again on the next day.
In order to escape that pattern I started learning how to design and develop websites after work. It wasn’t always easy to find the energy after a full day of work, but little by little I taught myself enough about building sites to where I could offer the service. I invested time in myself in order to realize a return on a different life style.
Neither investment nor return has to be about money. Your investment can be a better diet and workout routine for a better return on your weight and general health.
You can volunteer your time or even spend your money for the self satisfaction of helping another person.
You can invest in a relationship for the return that you and your partner are both happy.
In terms of achieving a positive ROI though, you wouldn’t change your diet to end up in poorer health, give money to an organization that promotes hate, or spend time working at a relationship that you know isn’t going to work out. None would be a good investment.
Increasing ROI Leads To Success
There are a lot of different definitions of success. I think a good one is “success is a positive ROI.” That may sound a little cutthroat if you only think in terms of money and the bottom line, but as I said above ROI is more than just money. Helping another person for the simple joy of helping someone is still a positive ROI.
In business I think it’s very important change the focus on what you can or can’t invest and focus instead on what return your investment can bring. As long as your return is larger than your investment your business grows. You have to see things beyond the size of the investment itself and look at ROI as a whole.
As I mentioned above when the focus is on the investment the tendency is to lower the investment. Smaller investments lower the risk. but they usually limit the return as well. The trick is to weigh the potential returns against the different investments you might make and choose those that offer the best potential for a positive ROI.
The Return Is Unknown In Advance
The last couple of weeks I’ve talked about starting a new small business forum. My reason for starting it had a lot to do with thinking in terms of ROI. The forum didn’t cost a lot to getting started. A few hundred dollars in software along with a monthly hosting bill for a virtual private server.
The investment is still significant for me as I don’t expect to see a monetary return from the forum for quite some time. By the time I know whether or not the investment was worthwhile I’ll probably be in for a grand, which is not money I can afford to throw away.
But my belief is that in time there will be a return and that not long after the ROI on the forum will be positive and increasing. A year from now I expect (and hope) my business will have grown as a result of the investment I’m making now.
Had I looked at it only in terms of investment my decision would have been not to start the forum and hold onto my money. There is of course no guarantee, but more than likely the result will be income from a new revenue stream with a return greater than the initial investment.
Another example of an investment I’m making with an unknown return is the WordPress theme I’m developing. The investment here is time and again the return is unknown. For all I know the theme will bring little to no return and my time could have been put to better use. There are no guarantees, but as with the forum I expect the end result with be another source of revenue for my business.
By continuing to invest in projects with a reasonable expectation of return my business will grow. Perhaps not with each project, but the overall return should outweigh the overall investment.
The Value Of The Return Is Sometimes Indirect
Sometimes the potential return is easy to see and measure. Using AdWords as an example one more time, as long as you make more in profit than you spend on the month’s clicks your ROI is positive.
A lot of the time the return isn’t as clear and the return is really more the next investment in the chain or a building block to the eventual return.
A few ideas where your return may not be so direct and obvious
- Investing time for the return of building relationships through social media that only pay off much later in the form of unsolicited links or a community willing to help you launch a new product
- Spending money on AdWords for the return of an increase in blog subscribers that ultimately leads to more conversions for future projects
- Purchasing a business for manpower or equipment that you later repurpose
- Learning something new to add to your skillset, which may help you land a job or be able to offer a new service in your business
- Developing a website you don’t monetize in order to attract a community that might be interested in the products or services you sell at another site
I remember the early days of this blog. I’d publish my latest post and was pretty sure no one was every going to read it. In those early days I doubt I had many or even a few subscribers and most posts weren’t ranking all that well in search results. It would have been very easy to decide that writing the next post was mostly a wasted effort, but I kept going.
Writing those early blog posts was an investment in time with an unknown return. Little by little posts did begin to generate traffic and more and more people subscribed. Today most incoming links to the site point to one post or another and help the service pages on the site get found. Writing blog posts for no one a couple of years ago eventually helped new clients find their way to me.
If you take one thing from this post know that in order to achieve some kind of return, you need to first invest something. It may be time or money, but you need to invest something. And when looking at the different things you can invest in see beyond the price of your investment and weigh the potential return. Your goal should be to seek a positive ROI in everything you do.
A positive ROI is a growing business. A negative ROI leads to an out of business sign on the front door.
What have you invested in that led to a positive return in a way that wasn’t immediately obvious when you invested?
Many of the biggest and most far-reaching investments we make in our lives are investments that have little or nothing to do with money.
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