How to maximise return on investment in a small business

Return on investment (or ROI) is a metric you use to understand how profitable an investment is. ROI compares how much you paid for an investment (product development, marketing, supplies, and so on) to how much you earned. Doing this helps you evaluate its efficiency. 

This guide will show you how to maximise your return on investment in your business using the following methods:

• Define what ROI means to you
• Streamline your sales process
• Track the right marketing metrics
• Limit your use of contractors and vendors
• Reduce your overhead costs
• Try increasing your prices
• Implement modern accounting software like Countingup

The first step towards maximising your return on investment is to define what you stand to gain from it. For example, you might make more sales, increase your revenue, boost your profits, reduce your cost of sales, increase brand loyalty, and so on.

Whatever it is you hope to achieve from your investment, make sure you set clear expectations so you can monitor how it measures up. If you can, set benchmarks for your return goals to track your ROI. For example, if you want to increase your sales, you might specify a timeframe (like a month) or a product line. 

The more specific you are with your goal setting and desired ROI, the easier it will be to determine if it’s worth making the investment and track how much you’re actually getting out of it.

Running a one-person business means you’re responsible for closing every sale. Another way you can maximise your ROI from your business is to analyse your sales process and see what changes you can make to improve it.

Start by looking at how your business website is set up to make the sales process as smooth as possible. For example, customers might abandon their purchase if you force them to register before they can buy something. Visitors might also abandon a sale if your website is slow or difficult to navigate. 

If you have a physical store or stall, take a look at your checkout process to see if you can make it more efficient. One tip is to invest in card machines with contactless payment so people can pay with their phones or smartwatches. Cash payments are decreasing, so providing multiple payment options will improve your sales process and, by extension, your business ROI.

As a business, you need to track different metrics to calculate whether your efforts are paying off or not. Marketing is one area you need to track to ensure your methods are effective. Still, many business owners get confused about which metrics to monitor. As a result, they might forget the metrics that really matter in terms of ROI. 

Examples of such metrics are customer acquisition costs (CAC) and the lifetime value of a customer (CLV). These metrics can show you how much revenue (money from sales) you generate from a single customer. As such, tracking CAC and CLV is a good way to determine the ROI you gained from investing in customer acquisition and whether you need to make any improvements.

On the other hand, so-called ‘vanity metrics’ like social media following, number of shared posts, blog views, and so on don’t give you valuable information that impacts your return on investment. As a result, focusing too much on them could mislead you. To maximise marketing ROI, choose metrics that give you the information you need to make necessary adjustments.

Overhead expenses are costs that don’t directly relate to your production, manufacturing, or other business operations, meaning they don’t help yield any profits. Examples of overhead costs include everyday expenses like bills, maintenance, utilities, taxes, legal fees, and so on. 

A great way to help maximise your ROI from your business is to make cuts to these costs wherever you can. Doing so will allow you to save money that you can eventually use to reinvest in your business to make it more profitable. 

Having leftover cash is highly beneficial since you never know when you might need it to cover sudden costs or capitalise on a new opportunity before you miss the chance. 

Increasing your prices will directly impact how much money your business brings in, hopefully increasing your revenue. It can allow you to boost your profits and improve your business ROI. If you succeed in raising your prices without decreasing your sales, you’ll have improved your return. 

Still, this one has to be done delicately to avoid scaring off customers. If you raise your prices too much and lose customers, you might end up lowering your profits and decreasing ROI instead. 

Look into ways you can charge more for your products or services while still providing enough value that customers continue to buy from you. For example, could you introduce a three-for-two deal to get rid of products that don’t sell well? Or, could you package your services differently and charge more that way? For more tips on how to increase your prices in the right way, read our guide called how to notify customers of a price increase.

Maximising ROI doesn’t have to take a ton of effort. You can accomplish it with a bit of careful planning and by implementing well-developed strategies. Learn more about how to create a long-term strategy for your small business in this guide.

Our final tip is to use modern accounting software to manage your business more efficiently and cost-effectively. Financial management can be stressful and time-consuming, so you want to do everything you can to make it easier. That’s where Countingup comes in.

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. You’ll also have more time to focus on optimising other areas of your business to maximise ROI.

You can share your bookkeeping with your accountant instantly (and for free!) without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.