PODCAST - what is roi and how to tell if an investment is worth it
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What is ROI and how do you tell if an investment is worth it? Well, ROI is pretty simple. It is an acronym that stands for return on investment. Now, when we look at return on investment, this is where I think most people get it wrong. I got it wrong for years as well, not because I was taught incorrectly, but because [00:02:00] I wasn't taught the full picture.
Before I became a business owner, I went to the University of Denver and I studied accounting and film. I studied accounting because I wanted to know how businesses worked. I wanted to really understand the monetary, the back end of how they run. And growing up, I was really into math. I did flashcards all the time with my mom.
In school, was really good at and really liked numbers. So when I got to college, it was a very easy progression for me. And even so, in accounting, I was not taught the whole picture of ROI, and that's why I'm gonna share with you today what this means in relation to your business, but also in relation to your life and choices that you make on a day-to-day basis to invest the most valuable currency that you and I have access to.
So let's get into it. When we're looking on return [00:03:00] on investment, this really means that when you invest in something, you're looking to get something back Let's take a really simple example. Let's say that you invest $100, okay? You invest $100 into whatever. Maybe it's in my Plug the Profit Leak Challenge.
What you're looking at doing is when you're investing it, you want to get something back, and at the very least, I bet you're hoping that you'll at least get $100 back. But would that be a good return on investment if you just got $100 back? I don't think so, because you're not just investing $100. You may be investing something else as well.
So what you wanna do is you wanna get a multiple of your money back. So if you invest $100, you probably... You know, you put $100 in the stock market, you probably [00:04:00] wanna get at least $108 back per year. You wanna at least make that 8% gain. That is the return on your investment. Now, when we're looking at our businesses, we need to look beyond the price point when we're looking at return on investment.
And this is where most people get it wrong, is we have different things that we can invest, different things that make up the I of ROI, and these things start with money. This is the obvious one. You invest X amount of dollars, you wanna get X amount of dollars back. But this is actually the least important and the least valuable of the resources that you and I invest on a daily basis.
What could be more valuable than money? Well, to start- Time. [00:05:00] Now I know that s- you may be s- thinking, well, time is money. Money has to be more valuable than time. Well, last time I checked, even here in the United States, we are printing more and more money every single year, but we're not getting more and more time.
Side note, I am a huge longevity nerd. I love health and wellness. I take really good care of myself, and I hope to live to be over 100 years old. I have a number in mind, and I want to get there. But even so, we all have a finite amount of time on this earth, and we really only have 24 hours per day to spend.
The reality, though, is we have to spend some of this time sleeping. So when you're looking at investing in something, you are not gonna be investing 24 hours a day into the [00:06:00] thing. You are gonna be investing some of your time. But really there is an even more scarce resource that we are investing every single day, and that is energy.
If you look at how much energy you have, how many hours, how many minutes of energy you have on a day-to-day basis, it is gonna be less than 24 hours a day. Even if you say, "Well, you know, Elon Musk only sleeps X amount of hours, and some days don't even sleep," that doesn't mean that he has the most energy or his best energy or the highest productive energy for all of those hours.
So if we're looking at energy, at least for me from a work perspective, the amount of time and energy I wanna put into work on a day-to-day basis, I probably have a good four to five hours per day. So now when we look at investing in something Would you say that you're not only investing [00:07:00] money, but you're also investing time and energy into anything that you're deciding to invest in?
Maybe for your business, you have a bunch of different opportunities, and when you're looking at it, you're like, "Oh, wow, this doesn't cost a lot of money. I'm gonna invest in this thing." Well, have you looked at how much time it may cost you? How much energy it may cost you? And this is really where you can see a big difference between investments that may be very little and investments that are a lot.
One of the main reasons why you'll see something cost more is because what? It takes less time. It takes less energy. Have you ever noticed that when you hire the cheapest service provider, maybe it's someone to come and fix something at your house. How was that experience? For me, I know that whenever I invest in the cheapest option, I'm not investing [00:08:00] in the best option.
The return I'm getting may seem like a good return monetarily, but the amount of time and energy that I blow through in getting that return makes it so the money that I saved wasn't even worth it. So when you and I are looking at investing anything in our business, we need to not only look at the monetary resources that we're putting in, we need to look at the time and energy resources we're putting in.
And on the flip side, we need to look at what the monetary time and energy return that we're getting. So let's go back to a hundred dollar investment. So let's say that you're gonna put a hundred dollars into something like my Plug The Profit Leak Challenge. Well, really, you're not just putting a hundred dollars into my Plug The Profit Leak Challenge.
You're putting a hundred dollars plus if you just get a general admission ticket, then you are putting three hours of your time. [00:09:00] Now, it also is gonna take some energy, so you're also putting three hours of energy. But it's also gonna challenge you to make changes in your business. So you're probably gonna be spending some time and energy outside of the challenge.
So we're probably actually looking at, I'd say, over a three-day period, you're probably putting about five to ten hours in, in addition to your hundred dollar ticket. Now, the return that I've seen in businesses from investing in my Plug The Profit Leak Challenge is exponential. So with a hundred dollars and five to ten hours of time and energy, what we have seen is people on the challenge within just a couple of hours uncovering 100K, $100,000 of profit per year [00:10:00] in their businesses.
Would you say that if you could explain what you do, the services, the products that you provide, and you could show in a monetary and in a time and energy investment a disproportional return? Well, when you do that, you see that for $100 and only five to 10 hours of work, I'm gonna get 100K per year back in my business, and that is just the monetary results.
The other reason why this is so great is because this is gonna shortcut the whole process, 'cause you could also find 100K in your business per year. It just may take you a long time and a ton of energy to do it. But with just $100 and just five to 10 hours of your time, you're going to uncover 100K per year.
Now, this is return on [00:11:00] investment when you and I are looking at investing in something. But did you know that there are other stakeholders in your business that are also asking this question? And this might be the biggest thing that I've learned over these 17-plus years of being an entrepreneur, and it took me about a decade plus to figure this out.
And it's that when we're looking at return on investment, it's not just about us. Everyone's thinking it. Everyone's asking these questions, and everyone is answering them at least at a subconscious level. So whenever your customer is evaluating if they're gonna work with you, they're not just thinking, "What is the price?"
They're at least at a subconscious level considering the time and energy commitment that they, their team, and anyone involved in the project is gonna have. I don't know about you, I have clients that the reason why they hire me out and they work with The eLearning Partners is because they know that even though they have to pay me a quarter million dollars per year to [00:12:00] do the thing or to help them leverage education to unlock millions of dollars of profit in their business, they know that it's gonna get done exponentially faster than if they did it themselves, like years faster.
And that's why it's so important for you to understand that you're not the only one asking, "What is the return I'm getting on this investment?" Well, what are some of these other groups? Well, I have this concept that I teach in my Plug the Profit Leak Challenge very in depth. I'll actually dive into your business together and map this out so that you can unlock the profitability of your business, and therefore exponentially increase your impact in the world.
But ROI pie, here's the basis. ROI pie invites you to look at the other stakeholders in your business, the pie in your business. It's an acronym and a framework we go through in my challenge, but here's the basics. When we're looking at ROI, we need [00:13:00] to consider the ROI our customers are looking at getting in addition to the ROI we're looking at.
We also need to look at the ROI our employees are looking at getting. And depending on your business, you're gonna have more and more stakeholders involved. You may have buyers that are different from your customers actually using your product or service. Well, you need to identify what are these groups looking at getting when they engage with your company?
Yes, including your team members, your employees. They're looking at getting something out of working for your company. Yeah, they want stability, they want security, they wanna make some money, and they wanna powerfully serve your mission. You need to fully understand this. You need to fully understand what your customers are looking at getting.
Well, when you show that you care about the return on investment that these groups of people and any other stakeholders that your company [00:14:00] impacts, when you show them and educate them that you know and understand what they wanna get, the return they wanna get, the problem that they have, and the return they wanna get when you solve that problem for them, this is gonna unlock hundreds and hundreds of thousands of dollars for you and your business, millions of dollars as you grow.
You are going to be able to serve so many more people powerfully when you unlock your ROI pie, which is why I invite you to join me for my next Plug the Profit Leak Challenge. You're gonna wanna grab a VIP ticket so that we can work even closer together. We're gonna spend double the amount of time together and really dig into your business so that you can align the ROI of the different stakeholders in your business.
And then you're gonna leverage, you're gonna learn how to leverage education as your competitive advantage to unlock hundreds of thousands of dollars per [00:15:00] year and to grow your impact globally. I invite you to grab a ticket to my next Plug the Profit Leak Challenge. Grab at least a GA ticket. But if you have a little bit more to invest, you're gonna get even more out of the challenge.
Grab your ticket. You can go to plugtheprofitleak.com or click on the link in the show notes and in the YouTube description. I'll see you in the next episode.
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AI is rising and so are we
