Return on Investment
Return on investment is a performance measure used to calculate exactly how effective your investments into your business are at generating income. ROI measures the profitability of investments and helps to compare the efficiency of multiple different investments.
As the name suggests, return on investment is a method used to measure the amount of return that can be made on a particular investment and how this compares and relates to the initial investment cost.
Key takeaways from this section:
- ROI stands for Return on Investment and is used to measure how much financial benefit you will receive from a particular investment for your business.
- To calculate ROI, you will have to divide the overall net benefit of an investment by the actual cost of the investment.
- ROI is not static and so for the best outcome, it is better to calculate it regularly for every notable investment.
- ROI should be calculated when you invest both time and money into your business.
Understanding return on investment
Any time you invest money or even time into your business, you will have a specific goal and a set of objectives in mind that you wish to achieve which, if met, would indicate that your investment has paid off.
Calculating ROI is also a good way of helping you to understand what is and isn’t working in your business so you can identify areas for improvement and make changes if needed. ROI helps you to delve deeper into the business decisions you make and gives you the chance to answer the question of what you will earn by investing time and money into any particular endeavour for your business.
It's also important to note that ROI isn’t static, and many variables can change with every different investment you make. If you want to calculate ROI and get an accurate sense of your commercial gains or benefits, the best idea would be to calculate ROI regularly so you can keep on top of any changes and make them to your business as needed.
How to calculate return on investment
Simply put, the formula to working out return on investment is as follows:
ROI = Current Value of Investment – Cost of Investment / Cost of Investment
The “Current Value of Investment” refers to the proceeds obtained from the sale of the investment of interest.
To calculate ROI, the benefit or return of the investment in question is divided by the overall cost of the investment. ROI is measure as a percentage which means it can be used to compare with returns from other investments and give you a better idea of what is working for your business and what investments are more beneficial for you.
Return on Equity FAQs
How do you calculate return on investment?
Return on Investment can be calculated by dividing the net benefit of your investment by the overall cost of the investment in question.
What is a typically good ROI?
ROI’s will differ for each business in each industry and entirely depends on a variety of factors including risk tolerance of the investor, time required for the investment to generate results and return and much more.
What industries will have the highest ROI?
Average ROI’s will always differ and develop for different industries due to technological changes, shifts in consumer preferences, fluctuations with competition and more. Arguably, technological industries may have higher ROI’s than others.
Have you thought about Invoice Finance as a cash flow solution for your business?
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
The benefits of invoice finance companies such as Novuna Business cash flow
Want to understand more Cash Flow Finance terms?
Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.
We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
Great service so far
From start to finish the process for transferring our invoice finance to Hitachi has been been brilliant, a smooth transition, great communication our link Person Jonathan Oakes has helped the process go through seamlessly, A great experience so far and a brilliant start to what we hope will be a long term partnership.