How do you show the ROI of your actions?

1 Define your goals

Before you can show the ROI of your actions, you need to have clear and specific goals that align with your vision, mission, and strategy. Your goals should be SMART: specific, measurable, achievable, relevant, and time-bound. For example, if you are launching a new product, your goal might be to increase sales by 20% in the first quarter. Having SMART goals will help you to focus your actions, track your progress, and evaluate your results.

2 Choose your metrics

Next, you need to choose the metrics that will help you to measure the outcomes and outputs of your actions. Outcomes are the changes or benefits that result from your actions, such as increased revenue, customer satisfaction, or brand awareness. Outputs are the deliverables or activities that you produce or perform, such as products, services, content, or events. Depending on your goals and context, you might use different metrics to quantify your outcomes and outputs. For example, if your goal is to increase customer satisfaction, you might use metrics such as Net Promoter Score, customer retention rate, or customer reviews.

3 Calculate your costs

Another important step in showing the ROI of your actions is to calculate the costs that you incur or invest in achieving your goals. Costs can be direct or indirect, fixed or variable, tangible or intangible. Direct costs are the expenses that are directly related to your actions, such as materials, labor, or advertising. Indirect costs are the overheads that are not directly related to your actions, but are necessary for your operations, such as rent, utilities, or administration. Fixed costs are the expenses that do not change with the level of your actions, such as salaries, licenses, or equipment. Variable costs are the expenses that change with the level of your actions, such as commissions, supplies, or travel. Tangible costs are the expenses that have a physical or monetary value, such as money, time, or resources. Intangible costs are the expenses that have a non-physical or non-monetary value, such as reputation, morale, or quality.

4 Calculate your benefits

Once you have calculated your costs, you need to calculate the benefits that you generate or receive from your actions. Benefits can also be direct or indirect, tangible or intangible. Direct benefits are the revenues or savings that are directly related to your actions, such as sales, profits, or reduced costs. Indirect benefits are the revenues or savings that are not directly related to your actions, but are influenced by them, such as referrals, loyalty, or competitive advantage. Tangible benefits are the revenues or savings that have a physical or monetary value, such as money, time, or resources. Intangible benefits are the revenues or savings that have a non-physical or non-monetary value, such as reputation, morale, or quality.

5 Calculate your ROI

Now that you have calculated your costs and benefits, you can calculate your ROI by using a simple formula: ROI = (benefits - costs) / costs. This formula will give you a percentage that indicates how much you gain or lose for every dollar you spend on your actions. For example, if your benefits are $10,000 and your costs are $5,000, your ROI is (10,000 - 5,000) / 5,000 = 1, or 100%. This means that you earn $2 for every $1 you spend on your actions. A positive ROI means that your benefits exceed your costs, while a negative ROI means that your costs exceed your benefits. The higher the ROI, the better the return on your actions.

6 Communicate your ROI

The final step in showing the ROI of your actions is to communicate it effectively and convincingly to your stakeholders, clients, or customers. You need to present your ROI in a clear, concise, and compelling way that highlights the value and impact of your actions. You can use different methods and tools to communicate your ROI, such as reports, dashboards, charts, graphs, or stories. You should also tailor your communication to your audience, their needs, and their expectations. For example, if you are reporting to your manager, you might focus on the outcomes and outputs that are relevant to your department or organization. If you are pitching to a potential client, you might focus on the benefits and solutions that are relevant to their problems or goals.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?