517: How To Weigh ROI Vs Cost When Making A Business Purchase

<h1 style="text-align: center;"><span style= "color: #0000ff;"><strong>This Podcast Is Episode Number 517, And It's About How To Weigh ROI Vs Cost When Making A Business Purchase</strong></span></h1> <div>Deciding to purchase something to help your construction business is a big decision. It can be challenging to part with hard-earned money, especially in the early days. To understand the right time to invest by purchasing something for your business, you must calculate whether the Return on Investment (ROI) would be profitable.<br /> <br /> The cost is the money you spend making the purchase plus any indirect costs (such as training costs) related to the purchase. The ROI is a calculation of financial gains or benefits that you obtain due to that cost.</div> <div><br /> To determine ROI profitability, there is a simple formula you can use. If the purchase yields a positive return, it can be considered profitable. However, if the purchase does not earn back the money it costs, it would be considered a negative return on investment.</div> <div> </div> <div> <p style="font-weight: bold;"><span style="color: #0600ff;">Return on Investment Formula</span></p> <p><span data-preserver-spaces="true">Using a formula to calculate the ROI only offers a rough initial estimate. Other factors might come into play, such as future work you will get because of the new asset or unforeseen expenses. The formula to determine ROI is:</span></p> <p><span data-preserver-spaces="true">ROI = (Net Profit / Cost of Investment) x 100</span></p> <p style="font-weight: bold;">Let’s see an example:</p> <p><span data-preserver-spaces="true">Suppose you run a spec home building company. Three employees spend their time in the field gathering data and taking stock of how a proposed development project would affect the landscape. Vegetation, waterways, animals – everything is taken into consideration.</span></p> <p><span data-preserver-spaces="true">You have one client who would like you to survey very rugged terrain. They would pay </span><strong