I was a sales representative for the fledgling Atlantic Lottery Corporation in Newfoundland in the 1980’s (a lifetime ago, it seems). I recognize that experience provided more real “education” than three university degrees have done for me since. One great lesson came on a summer’s day in the town of Lawn on the province’s south coast. A particularly resistant shop owner was testing my Xerox and Dale Carnegie sales training techniques to the limit. It didn’t seem he was going to buy into lottery products until I finally asked him to tell me what it was he really wanted.
“At the end of the day,” he says “I want to be richer, smarter, or both – you show me how what you got makes me that, and I’ll buy it”.
It seems that you don’t have to be a big, sophisticated business to understand “Return on Investment“. Far too often businesses and their developers, accountants, and consultants use ROI calculation as a way to prove a decision they have already made about a project or investment. That’s what I call decision-based evidence-making – where you build evidence around the decision instead of collecting evidence to make a decision. Done properly, however, ROI calculation should reduce risk and optimize the likelihood of making a good choice among investment decisions.
ROI calculation is not easy – but for small and medium-sized enterprises (SMEs) it is more important than ever to do it as well and as objectively as you can. There are some excellent applications out there to help you to do your own, or to support your decision systems when working with a consultant or advisor. Canada’s Business Development Corporation (BDC) has one that I have used on occasion. Another with valuable additional insights is available at calculator.net. A particularly good tool we like to use is the ROI Calculator from the now defunct E-Commerce Institute of Montreal – unfortunately also no longer available online, but call us and we’ll be happy to get a copy to you. In addition to helping guide you through a well-developed analysis, the tool generates a report to calculate your Total Cost of Ownership, Net Present Value, Payback Period and your Return on Investment for any project (technology or otherwise) that you may be considering. It also provides space for adding in discussion of soft/ non-financial returns which most calculators (and too many consultants) fail to recognize. This tool is simple to use and needs only MS-Excel to run.
I do recommend, however, you engage a consultant or accountant in any serious ROI exercise, but regardless, ROI tools like this really can help with evidence-based decision-making.
WARNING: these tools could make you richer, smarter, and likely both!