Taking a Closer Look at Business Investments

Part of owning a business is the overhead. Operating costs are an undeniable part of the big picture and they’re endless as long as the business is in business. And sometimes the biggest expenditures are business investments that are going to keep the company up and running over an extended period of time.

These business investments require a little more consideration than the day-to-day costs. These can include:

• New equipment
• New space
• Additional staff
• New insurance plans
• Branding
• Marketing/advertising

At some point in the life of your business, you may have to spend money on all of these or just a few. But nevertheless, you will have to make improvements one way or another.

So how do you know if your business investment is paying off?

The first step to evaluating an investment is calculating the total cost. Most of the time, the cost of a new venture or piece of equipment isn’t the bottom line. Look at the potential investment from all angles, and add up the auxiliary charges. Are there delivery charges associated with it? If you’re undertaking an advertising campaign, have you considered the costs of design and media placement? This is how you identify whether or not you can actually afford it, but more importantly, it’s how you track the success of the investment.

It might be tough to gauge the success of an investment — especially if the investment can’t produce a direct return — but if you can measure the ROI, do it. If you’ve invested in a new website, track the metrics on the backend and see if there’s a spike. Sometimes there’s a tangible way to track these results like backend analytics or customer point-of-purchase questionnaires. But other times, you’ve got to look at the general overall success of the company to measure the success of an investment. Has your social media following grown? Have you seen a rise in your audience base? Are more people walking through the door?

More often than not, it’s impossible to gauge the success of a business investment immediately after implementation. So it’s essential to continually evaluate the investment over the following several months by calculating the [tangible and intangible] ROI periodically. If there is a clear trend in cost recuperation, then you can consider the investment a success and continue to set new goals for throughout the lifespan of the venture.

If you have any questions about evaluating your next investment, give us a call and we’d be happy to take a closer look for you.