ROI is an integral part of understanding where your company is succeeding and where it needs some work. ROI, or Return On Investment, is the ratio between your net income and your investment. ROI is a common measurement to evaluate the efficiency of your spending. However, what you include and exclude from your ROI calculation can greatly affect where you devote your time and budget. That is why it is critical to include your internal time as a part of your ROI.

WHAT TYPICALLY GOES INTO ROI

There are plenty of things that people associate with being a part of ROI such as costs to pay employees and maintain physical workspaces, costs of the goods or services sold, stocks purchased, commissions, and technical costs. These spendings are naturally thought of as investments because they directly affect a business’s profitability. It's common sense that not paying employees or purchasing the raw materials to produce your goods would kill your business. However, these common sense expenses included in ROI sometimes confuse businesses about including internal costs in their ROI calculations.

“Businesses ignore the costs of internal time because they think of it as a given. This causes a huge gap in information when ROI is being calculated.

— Ravi Parikh, CEO, RoverPass

WHAT COUNTS AS INTERNAL TIME

It is easy to see the work that you do for your clients and the investment it takes to succeed with clients as a valued investment. There is also the work that you do on your own company that impacts your ability to attract, serve, and retain customers. This is known as internal time. The time and money that you devote to a new logo, refreshed web copy, updated customer service protocol, and more affects your company’s performance and reputation.

INCLUDING INTERNAL TIME

Maintaining and updating any branding, communication, and customer service can take hours and thousands of dollars. But this investment is never lost. In fact, devoting time and money to these essential parts of your business can make a massive difference in getting clients through your sales funnel. That is why it is incredibly necessary to include your internal time into your ROI calculations.

RESOURCES FOR CALCULATING ROI

There are plenty of guides on how to calculate your business’s ROI on your own. The essential information to have and understand is your net return on investment (the final value of investment minus the initial value of investment) and the total cost of investment. Once you have these values, divide the net return on investment by the total cost of investment. Next, you multiply your results by 100, as ROI is measured in percentages, and you will have your ROI value.

“Many businesses don’t consider internal time and resources when calculating ROI and instead focus only on hard costs. If looking to incorporate internal resources into ROI calculations, they should be incorporated consistently across all projects to keep ROI metrics comparable.

— Krista Neher, CEO, Boot Camp Digital

IN CONCLUSION

Your internal time is just as important to your company's success as your customer and production-based time. Having your internal time as an established part of your ROI calculations will guarantee that your business continues to allocate funds to these needs. Including your internal time in your ROI calculations will help you better evaluate how efficiently you are spending.

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