Return on investment
Return on investment is an overused phrase but an underused concept in business.
What return are you going to make for that investment? What is the payback period and how confident are you on the return?
Say a company can only afford to spend $20 million on investment each year how does it decide what to invest in?
Key criteria
• Is the investment aligned to strategy?
• What are the benefits of the investment?
• What is the payback period for the investment?
• What metrics will the investment improve?
• Are there ongoing financial benefits of the investment?
I am a big believer in working out where your investment will give you the biggest return. If measured correctly, more money can be invested if there is a clear ratio of investment versus return on investment.
Making good investment decisions will be critical to the success of any organisation especially during the current environment so take the time to consider:
• How much money you can invest?
• What's your criteria for investment?
• How are you going to track benefits?
• How and who will you hold to account?
Somehow when people get project money, they forget it's cash out the door - it’s real money, it's costing the company. While there are financial reporting, tax and other benefits of consideration when investing, don't forget you are outlaying cash. Spend what you need to deliver the outcome / return on investment.
Post Covid-19, companies need to be very focused on where they spend their money and payback period. If the pay period is longer than 3 years, leaders will need to consider if it's a good investment.
How do you think about return on investment in your company? Does it need a review? Is your payback period more than 3 years? Maybe you need to reconsider.
“The biggest room in the world is the room for improvement.”
Do you need to assess the ROI in your business and make some changes? Let us help.
Whiteark is not your average consulting firm, we have first-hand experience in delivering transformation programs for private equity and other organisations with a focus on people just as much as financial outcomes.
We understand that execution is the hardest part, and so we roll our sleeves up and work with you to ensure we can deliver the required outcomes for the business. Our co-founders have a combined experience of over 50 years’ working as Executives in organisations delivering outcomes for shareholders. Reach out for a no obligation conversation on how we can help you. Contact us on whiteark@whiteark.com.au
