Even though your current business operation may be generating good profits, you can still seek ways to increase your return on investment (ROI). Generally, you can calculate the ROI from tangible input, especially in cash and asset injection. However, the benefits of intangible injection, like brand awareness and operational efficiency, can still give your business an ROI boost.
To put it plainly, you can calculate your ROI basing it on revenue and costs while maintaining efficiency in your operations for maximum financial benefits. With an easy ROI calculator, you can determine your current ROI percentage. You can then develop strategies to increase returns towards your desired target from this percentage.
With continuous practice, the below tips can help in boosting your ROI and achieving your profit margin targets.
1. Make Use of Automation
Various software instruments can help reduce human input within your operational areas. By embracing automation, you improve efficiency while saving time and cost. Some software systems like supply chain management (SCM) and customer relationship management (CRM) can help with routine tasks that would otherwise take time if done manually.
Additionally, when you automate your processes, the team members can concentrate on core duties and thus help increase productivity and efficiency. As a result, you can increase output, translating to increased returns.
It’s important to note that reducing human input reduces errors that can be costly for the business. For example, a wrong entry at receiving point can result in overpayment to vendors, reducing your profit margin. However, with software like warehouse management systems, you eliminate the chances of such an error.
Looking at labor costs, if you integrate tools like chatbots in your business, you reduce your staffing requirements. Thus, you have fewer employees to pay and keep a better profit margin.
2. Evaluate Ways to Increase Revenue And Reduce Costs
Increasing your revenue while reducing costs may be one of the forefront ways to boost your ROI. However, while at it, you should ensure that it doesn’t affect your output quality. One of the ways you can increase revenue is to either increase sales or raise prices without negatively affecting your business. As mentioned, the quality of your products or service can determine which of the two steps you need to undertake. Therefore, it would help evaluate your competition and generate a sales history to facilitate an informed decision.
While raising the prices may seem the obvious option, it wouldn’t achieve the desired goal if it reduces your sales. On the other hand, increasing sales may require sales promotions which can add to your costs. However, if you achieve a positive margin after deducting the expenses, it’s a factor to consider.
Sometimes, increasing revenue may not be sustainable. Therefore, you need to find ways to protect the income by managing and reducing your costs. To assist you in this process, you need to group your costs either as fixed or operational. The fixed costs would be rent, insurance, and licenses. On the other hand, operating expenses are all additional costs that directly affect the production line—for example, labor, power, and the costs of sales.
While fixed costs are a constant, your operational costs require your vigilance to ensure they don’t affect your revenue. Developing ways to control these costs is key to increasing your income and, ultimately, your ROI. Overall, boosting your ROI requires you to find a balance between high revenue and lower costs without affecting your output quality.
3. Create and Maintain Bonds With Your Customers
While marketing techniques focus on attracting potential customers, your customer relationship is key to maintaining those that patronize your business. Therefore, creating a good rapport with the existing ones can help you boost your revenue. As part of enhancing your business’s customer relationship, you can develop referral and loyalty programs.
Though the two may sound different, the result is the same, cultivating loyalty. Through a referral, your customers can help you bring new customers. It can increase your revenue through increased sales. It enables your customers to earn points when referring others to your business. You can achieve this through a registration platform that tracks the referral system.
Through loyalty programs, customers earn points too when they spend in your business. Customers can redeem them after a certain quantity or during a particular period depending on their preference. These two programs can build and increase your customer base, thus boosting your returns.
4. Make Use Of A/B Testing for Your Online Presence
Most successful businesses rely on their website traffic. Therefore, you too should ensure you optimize your website to provide a memorable user experience (UX). By improving the website’s UX, you increase your conversion rate, boosting your ROI.
That said, using the A/B testing enables you to adopt a website version that can deliver optimum UX and help improve your business’s metrics. Some website features you can test are graphics, landing page, call-to-action, navigation, and layout. You can increase your website traffic and conversion rate with successful testing, positively impacting your ROI.
To boost your ROI, you need to increase revenue and control the costs. Additionally, you should embrace automation, create bonds with your customers, and use A/B testing for better conversion rate optimization.