What ‘return on investment’ means for small business owners
Last year, the COVID-19 shock upended many local businesses, as the government enforced intermittent lockdowns and curfews. With most businesses closed and imposed restrictions on movement, the Philippines experienced its biggest recession since the end of Second World War, according to the Philippine Statistics Authority.
Thankfully, economic analysts are expecting a fragile yet steady recovery for existing businesses in 2021, as economic activity gradually picks up, which in turn would usher in a rebound to growth. This year, the next steps for small and medium-sized enterprises are to survive and thrive by means of growing, expanding, and focusing on return on investments (ROI).
Recognizing the value of ROI is essential to business success, as most existing business owners will know. Looking at your annual ROI helps you analyze and compare the performance of your investment during specific time periods.
The value of ROI
Return on investment is defined as the financial benefit received from a certain business venture. Through ROI, business owners can (1) determine an investment’s worth, and (2) monitor its performance.
The simplest formula to measure this is by dividing the net profit, or the current value of investment, by the cost of investment. This simple equation, with a few inputs, tracks both profitability and efficiency for businesses.
Investments made on marketing campaigns, maintenance, and other things can also be monitored easily. The flexibility and versatility of ROI makes it a necessary key performance indicator for business profitability.
Focus on business expansion as a goal
The number of existing businesses makes the competition tight. Stay on track toward business expansion with the essential tools and ROI as a profitability metric.
Be the business that offers not only the best products and/or services, but also transparency. Say no to ulterior motives and unethical practices.
And before expanding, maintain a positive ROI momentum. A good indicator that the business is growing is when the profit accumulates consistently.
Ride the waves with caution
Sustaining positive ROI and watching your business grow can be exciting, but it also comes with its own set of challenges. Business expansion calls for long-term investments which most often than not, means money out of the pocket.
One cautious but quick way to supplement capital investment is to get funding from a Bank.
To help existing SMEs, BDO SME Loan allows entrepreneurs to maximize their available real estate properties by using up to 70% of its value to get a business loan. Through its Term Loan, business owners can borrow a lump sum and spread-out payments to make the monthly amortization more manageable. With the additional funding, entrepreneurs can support long term needs such as (1) purchasing new equipment to increase production, and (2) acquiring new warehouse or office space to upgrade business facilities.
Making good entrepreneurial decisions can be daunting, but it becomes easy when you find the right business partner. Go for it with BDO SME Loan. Get a quick computation to help with your loan decisions through the BDO SME Loan Calculator.
For inquiries, visit BDO SME Loan today.
