What is ROI?
Return on Investment (ROI) is used by companies to understand the business value of investments and today it's one of the main drivers behind spending money on technology. ROI is a family of financial measurements known as Net Present Value (NPV), Internal Rate of Return (IRR) and Payback and are all as important as each other. NPV, IRR and Payback are the primary measures that define the business value of any investment and therefore is key within the board decision making process.
The ROI family represents Value (NPV), Rate (IRR) and Time (Payback). Value; how much money they will make on the investment. Rate; the yearly percentage returned on the funds used on the investment. Time; when they will get their initial investment back. The objective of ROI in the sales process is to quantify and value the benefits rather than minimise the cost. Clients need ROI based on their own specific circumstances. Industry standard claims for ROI in other countries or clients are irrelevant.
Today's decision makers have no budget as of right. Decisions to invest in technology solutions are competing against demands for funds for marketing, restructuring and sales campaigns. A jointly sponsored and believable ROI can lead to budgets being freed up and investment spend accelerated.
- IRR: Internal Rate of Return - this is the return per year on the original investment when considering all costs and benefits over the given investment period.
- NPV is "Net Present Value"- the value of the ongoing benefits discounted back to the present year. NPV calculates the profit on the deal (in the client's terms) and recommends whether a project should be undertaken or not.
- Payback Period- is the time it takes for benefits generated to recover returns that equal the initial spend.
Our consultants are well versed in budgeting and understand all their financial implications and constraints. They can competently assist internal departments and external consultants and entities in the preparation of detailed and well founded feasibility studies and Return on Investment (ROI) reports, whether for your internal use, for approval and follow up purposes, or for your external use, for example to secure a credit facility or a leasing.
These reports will help you assess the validity of your investments and choices and to compare between them the various alternatives we may propose to you, so that you may choose the one that fits better your business not only technologically and operationally but also financially. They will also provide documentation to allow you comparing the effective results with your ROI targets.
Contact Us today to find out more about ROI.
