How to use ROI to make smarter business choices

Understanding return on investment (ROI) is crucial for any business, as it helps you determine if your resources—money, time, or effort—are being spent wisely. To optimize ROI, focus on areas like cost of goods sold, marketing spend, and operational costs. Look for opportunities to cut unnecessary expenses and ensure your money is working efficiently. For example, as customer acquisition costs rise, consider alternatives like referral programs or building a community rather than pouring more into paid ads. These strategies can be just as effective, with less investment.

ROI also extends to more complex channels, like retail partnerships. Keep track of all costs, such as distributor fees and chargebacks, to ensure your revenue aligns with your expenses. Without clear bookkeeping, you might miss discrepancies that hurt your bottom line.

It's important that everyone in your company is aligned with the goal of driving ROI. Whether it’s sales, marketing, or operations, every team member should have key performance indicators (KPIs) linked to the business’s overall profitability and growth. By tracking your financials regularly and adjusting as needed, you’ll make smarter decisions and continue to grow. Clean, well-organized financials are the foundation for understanding and improving ROI. If you’re unsure where to start, working with a financial professional can help ensure your business is on the right track.

Episode paraphrased using AI