RETURN ON INVESTMENT ... MORE THAN JUST A NUMBER

You’ve probably heard of return on investment, but do you know what it is?

In financial terms, return on investment is an assessable number. If you spend £500 on a consultant who reviews your cost base and they recommend new suppliers which save you £2,000 in a year then your return on investment is 4:1, you have saved 4 times what the cost was – fantastic!

But for many small businesses there are other ways to look at this. You might decide to outsource part of your business, say your admin:

You have found a freelance assistant who charges £25 per hours and they would do 2 hours work a week for you.  You can look at this purely on the numbers and say, this is costing me £50 a week, why would I do it?

But what you need to do it look at it and say, that admin was taking me 4 hours a week as it’s not my thing, so those 4 hours you have gained back have costs you £50 and that’s £12.50 an hour. Now, what can you do with those 4 hours?

  • It might be you can take on an extra client that brings in an additional £100 a week and immediately the return is 2:1 (£100 in for £50 out).

  • It might mean that you don’t need to have a childminder for 2 nights after school and you can spend that time with your kids, the childminder saved cost has a value (say £25 a week) this then means that the true cost to you is £25, not the £50.  But the time with your kids may be priceless to you so that is worthwhile.

  • It might mean you have a proper lunch break so are less stressed and more productive in the afternoon, the return here cannot be given a monetary value but your health and wellbeing are vastly improved.

Returns on investment are not always a tangible, assessable number – you need to look at the bigger picture.

Not often you get an accountant saying that it’s not all about the numbers now is it?!

And if you want to know what I outsource and get help with then pop over to the “Team” page on the website and meet my lovely ladies! The time they save me is priceless!

Rachael Savage