How Much Can You Afford To Turn A Profit?

I just got off the phone with a freind that I wrestled with at the University Of Nebraska, he currently has a roofing company where they install roofs in Kansas, Colorado, Nebraska & Texas. We are in the process of building a new site for him and should have it up within the month. I am extremely excited about getting the site up and to start generating them leads, as these leads can be very profitable. I’ve posted my thoughts about local business marketing before on my blog.

 

Anyway onto what this post is about…the conversation started out with him telling me how much he was spending each month and why he needs to lower his expensese. As many business owners can attest, they hate expenses. But not all expenses are bad, the problem is that most businesses don’t know which ones are good and which ones are bad.

 

Wake up business owners and learn what your ROI is for every lead and/or sale. We went on to discuss that he has no idea how much it costs him to generate a sale, and therefore has no idea what his net profit is on each job they pick up.

 

The reason this is a problem is that every business owner will hit a point where they just don’t want to spend over a certain amount per month for their expenses. But what if they have an expense that has a 100% ROI, why would you want to stop putting money into this? Let’s just assume this expense doesn’t require more work, just the fact of putting more money equals more profit. So why would you stop? Most business owners stop simply because they don’t know their ROI. I sent him over an excel spreadsheet, for him to fill out for every lead he generates the cost & the return. This will help both of us know where we should be spending money.

 

Moving onto another story, I have another freind that sent me a website that he has just setup within the past month. Parts of the site aren’t completed, and they just sent off $6,000 for a magazine ad that will go out nationwide in March 08. Once again I asked him how his site was converting and he had no clue. If the ad flops will it sink his business, before they even had a chance to begin?

 

Get to know your ROI and it will make the world of difference for you business!

 

P.S. As a side note, I setup a website for my fathers dairy farm a few months ago. He just sold his first cow for a $2,000 profit. So far this month my dads ROI was 589.66%, not bad for a dairy farmer!

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