What Is ROI? How to Tell If an Investment Is Worth It.

When most people hear the term return on investment, or ROI, they immediately think about money. They think about how much they invested and how much money they received in return. That is certainly part of the equation, but it is not the whole picture. After more than 17 years as an entrepreneur, I have learned that understanding ROI requires us to look beyond the price tag. We also need to consider the time and energy we invest, as well as the return we receive in each of those areas. In this post (and the YouTube video linked here and podcast episode linked here), I want to show you what ROI really means, how to tell if an investment is worth it, and why this perspective can completely change the way you make decisions in your business and your life.

What is ROI?

ROI stands for return on investment. At its simplest, it measures what you get back compared with what you put into an investment. If I invest $100, I obviously want something in return for that $100. At an absolute minimum, I might hope to get my original $100 back. But would simply getting my $100 back make that a good investment? Probably not. If I put $100 into something and receive exactly $100 back, I have not really created a meaningful financial return. I have simply recovered what I invested.

A good investment should ideally produce a return that is greater than the resources you put into it. For example, if I invest $100 in the stock market and receive $108 back after a year, I have generated an 8 percent return. That is the traditional way we tend to think about ROI. However, this is where I believe many business owners make a mistake. They look only at the financial investment and the financial return. They fail to account for the other resources they are putting into the investment, which can completely change whether something is actually worth doing.

Why money is only part of the ROI equation

Money is the most obvious resource we invest, but I would argue that it is not the most valuable one. When I invest money into something, I can potentially make that money back. I can earn more money, save money, or redirect money toward another opportunity. But there is another resource I invest every single day that I can never get back: time.

We all have a finite amount of time. We get 24 hours in a day, and some of those hours have to be spent sleeping, eating, taking care of ourselves, spending time with family, and doing all of the other things that make up our lives. Even if I wanted to spend every waking hour working on my business, I could not create more hours. That makes time an incredibly valuable component of any investment decision. When I decide to spend three hours on something, those are three hours I cannot spend somewhere else.

The most overlooked investment: energy

There is another resource that I believe is even more important to consider: energy. We might technically have 24 hours available in a day, but we do not have 24 hours of high quality, productive energy. The amount of energy I have available for focused work is much more limited.

I am a huge longevity nerd, and I take my health and wellness seriously because I want to live a long and healthy life. But longevity is not just about how many years I have. It is also about the quality of the energy I have during those years. From a work perspective, I know that I only have a certain number of hours each day when I can operate at my highest level. For me, that might be four or five highly productive hours. That means I need to be incredibly thoughtful about where I put that energy.

When I evaluate an investment, I therefore need to ask three questions. How much money am I putting into this? How much time am I putting into this? And how much energy am I putting into this? If I ignore the second and third questions, I can convince myself that something is a great investment simply because it looks inexpensive on paper.

Why the cheapest option can have the worst ROI

Have you ever hired the cheapest service provider because you thought you were getting a great deal, only to discover that the experience cost you far more than expected? Maybe the person took twice as long to complete the work. Maybe you had to fix mistakes yourself. Maybe you spent hours communicating, following up, correcting problems, or explaining what needed to be done.

I have experienced this myself. Sometimes the option that costs the least money creates the biggest drain on my time and energy. The money I saved can quickly become irrelevant when I consider everything else I had to invest to get the desired result. This is why I do not believe you can accurately evaluate an investment simply by comparing price tags. A more expensive option can sometimes deliver a much better ROI because it saves time, protects energy, produces better results, or gets you to the desired outcome significantly faster.

How to tell if an investment is worth it

So how do you tell if an investment is worth it? Start by looking at the complete investment rather than just the financial cost. If something costs $1,000, the real investment might be $1,000 plus 20 hours of your time and a significant amount of your mental energy. You then need to compare all of those resources against what you expect to receive in return.

The same principle applies whether you are investing in software, a consultant, an employee, a course, marketing, education, or a new business opportunity. Ask yourself what you are putting in and what you realistically expect to get back. Then ask whether the investment will help you reach the desired outcome faster or with less effort. An investment that saves you 100 hours may be dramatically more valuable than one that saves you $500. The goal is not simply to spend less. The goal is to create the greatest return from the resources you have available.

A real world example of ROI

Let me use my Plug the Profit Leak Challenge as an example. Imagine that you purchase a general admission ticket for $100. At first glance, your investment appears to be $100. But that is not actually the full investment. You are also investing your time by attending the challenge, and you are investing your energy by participating, thinking through the exercises, and making changes in your business.

Over the course of the challenge, you might invest three hours directly in the event and several additional hours applying what you learn. You could therefore be looking at five to 10 hours of time and energy in addition to your $100 financial investment.

Now consider the potential return. I have seen businesses uncover $100,000 or more in annual profit opportunities through the process. Suddenly, the $100 price tag is not the most interesting part of the equation. The real question becomes whether investing $100 and several hours of time and energy can help you uncover a significantly larger financial opportunity. That is the kind of disproportionate return that can make an investment incredibly valuable.

ROI is not just about your business

One of the biggest lessons I have learned over the years is that I am not the only person evaluating ROI. Everyone around my business is doing the same thing, even if they are not consciously using the term ROI.

Your customers are evaluating their investment. Your employees are evaluating their investment. Your business partners are evaluating their investment. Buyers, decision makers, and other stakeholders are evaluating their investment as well. They are all asking some version of the same question: What am I going to get in return for what I put into this?

Your customer may be asking whether your product is worth the money, but they are also considering how much time it will take to implement and how much effort it will require from their team. Your employee may be considering compensation, but they are also thinking about stability, security, professional growth, purpose, and whether they can contribute meaningfully to the company's mission. Every stakeholder has their own version of an ROI calculation.

Understanding the ROI pie

This is the idea behind what I call the ROI pie. When I think about ROI, I do not want to look only at my own return. I want to understand the returns that every important stakeholder is looking for.

That means asking questions about your customers, employees, buyers, partners, and anyone else who interacts with your business. What are they investing? What problem are they trying to solve? What result do they want? What would make their investment feel worthwhile? When you understand those questions, you can design your products, services, processes, and education around the outcomes people actually care about.

This can become a powerful competitive advantage. If you can clearly demonstrate that you understand what your customers want to achieve and can help them achieve it faster, more efficiently, or with less energy, you are no longer competing solely on price. You are communicating the value of the return they can expect from investing in you.

The best businesses create disproportionate returns

Some of my clients work with me because they know they could technically do the work themselves. The question is not whether they are capable of doing it. The question is how long it would take them, how much energy it would require, and what else they could be doing with that time.

For example, a business might invest a significant amount of money to work with The eLearning Partners because they know the work can be completed dramatically faster than if they attempted to build everything themselves. The financial investment is only one part of the equation. They are also buying back time, protecting their team's energy, accelerating implementation, and creating the opportunity to generate a much larger return.

This is an important lesson for business owners. If you want people to invest in your products or services, do not simply tell them what something costs. Show them what they can get back. Help them understand the financial return, the time savings, the energy savings, and the larger outcome your solution can create.

Use ROI to make better decisions

The next time you are deciding whether an investment is worth it, I want you to stop looking only at the price. Write down the money you are investing. Then estimate the amount of time you will invest. Finally, consider the energy required and whether that energy could be used more effectively somewhere else.

Then do the same thing on the return side. What financial result can you reasonably expect? How much time could you save? How much energy could you preserve? What other opportunities could become available because of the investment? This simple exercise can reveal that an investment you initially thought was expensive may actually be one of the best decisions you could make.

It can also work in reverse. Something that looks inexpensive may turn out to be extremely costly once you account for your time and energy. That is why understanding ROI is not simply an accounting exercise. It is a decision making framework. It helps you determine where your limited resources should go so you can create the greatest possible return.

Your ROI can unlock greater impact

Ultimately, I believe ROI is about much more than making money. Money matters, especially when you are building a business, but the bigger opportunity is using your resources intelligently so you can create more value and have a greater impact.

When you understand the ROI your customers want, you can serve them more powerfully. When you understand the ROI your employees want, you can build a stronger team. When you understand your own ROI, you can make better decisions about where to invest your money, time, and energy. And when you can align all of those different returns, you create a business where more people are getting meaningful value from the relationship.

That is the real opportunity. Do not ask only, "How much money will I make from this?" Ask, "What am I investing, what am I getting back, and what is the return for everyone involved?" Once you start thinking about ROI this way, you can make smarter investments, uncover hidden opportunities, reduce wasted time and energy, and build a business that creates significantly more value.

Take the next step with your ROI

If you want to go deeper into this concept and identify opportunities to unlock more profitability in your business, I invite you to join me for my next Plug the Profit Leak Challenge. We will look at your business through the lens of profitability and help you identify opportunities you may not be seeing right now.

I encourage you to grab at least a general admission ticket. If you have more to invest, a VIP ticket gives us more time to work together and dig deeper into your specific business. The goal is not simply to learn another business concept. The goal is to apply what you learn and identify real opportunities to create a disproportionate return.