Why you must monitor your ROI - Business Works
BW brief

Why you must monitor your ROI

by Phil Foster, CEO of Love Energy Savings We may have finally emerged from the recession, but we're all still taking cautionary financial measures to keep our heads above the water - or at least we should be. Don't speak too soon about Britain's prosperity, as there's a long road ahead, says Phil Foster, CEO of Love Energy Savings.

A recent study by Begbies Traynor found that there has been a 22% increase in the number of small businesses suffering from 'significant' financial distress when compared with last year. This is a sobering statistic that should serve to keep all of our feet on the ground amid new reports of significant economic growth.

Please don't confuse my wariness with pessimism. There's nothing wrong with being careful and we could all learn a little from thrifty living. The rise of the economical lifestyle has seeped into our home life, yet there still seems to be a stigma surrounding money saving measures in the workplace. Whilst we keep tabs on expenses, we're not exactly going the extra mile to make every penny count.

If anything, one could argue that the financial safety of our businesses is even more important than that of our own homes, so why aren't we implementing money saving tips at work?

Maximising ROI

are you really spending that money wisely

According to the Begbies Traynor study, SMEs now make up 92% of UK businesses that face significant financial distress. It's easy to panic and throw money at your business in a bid to keep you and your employees afloat, but are you really spending that money wisely?

Every penny you spend that doesn't bring in new leads counts as a loss. If you're not analysing how you're spending your money, you may as well throw it into the wind.

It goes without saying that we should be keeping a visual record of our corporate expenses, using data to assess whether we are getting adequate return on investment. Of course, recording methods will vary from business to business, often depending on the size of the organisation. Recent research by Intuit QuickBooks suggested that spreadsheets are still the order of the day for most SME owners, with more than half of the survey respondents stating that they rely on this rather dated means of keeping tabs on their finances.

While it's slightly concerning that so many firms are insistent on keeping all of their financial details on a basic spreadsheet, at least they are maintaining some form of record and this should be enough to gauge whether or not ROI targets are being met.

Firms can look at how much they've spent and if they could have put these funds into something else. For example, you may be ploughing hundreds of pounds from your marketing budget into advertisements in local media outlets to no avail. This money could have instead been put into strategic PPC [pay per click] advertisements online, which are shown to exactly the right people you intend them to be, boosting your chances of conversions.

Panic cutting

If we were to waste this amount of money in the home, we would be up in arms. Why do we let it slip by in our business?

making panic cuts is possibly the worst thing you can do

Making panic cuts is possibly the worst thing you can do, however. So, don't just pull the plug on a long-term marketing campaign or social events for your workers without considering the repercussions. Staff will begin to worry, morale levels will drop and you’ll notice a serious dip in productivity because of this.

There are plenty of smaller cuts you can make around the office. Become more eco-friendly, compare business energy prices online, reassess your suppliers and even cut the amount you spend on lunches, but the one thing you must be extremely wary of at all times is keeping your staff on board. A recent survey run by Zurich found that 15% of business owners have laid off staff in the previous three months. If it gets to the point that you have to cut the very people who keep your business running, it's time to seriously investigate your internal operations.

It's not all doom and gloom, of course. There are signs of more prosperous times on the horizon and Western Union Business Solutions recently published a survey which found that 70% of businesses expect to see growth in the near future. With many firms dipping into international markets and seeking new ventures, there is just a hint of excitement in the air.

But, as I stated at the start of this article, it's always important to stay level headed in business, making sure our investments are yielding positive results and that we're not spending money unnecessarily.

As CEO of Love Energy Savings, Phil Foster has a strong desire to support UK SMEs, helping them to make much needed savings on their energy bills.

Tweet article
BW on TwitterBW RSS feed