Wednesday, October 21, 2009

And here's another news on business... remember what I wrote two posts back about the need to write a business plan if you're really keen on making it as an entrepreneur, well, as I continue my search and research on how to go about expanding our internet cafe, I stumbled upon another topic that I think is worth knowing, it is about Return on Investment or what is commonly pertained to as ROI. As I am so incline to learn the ups and downs, and left and right of business though mine is just a small cafe, the article explaining what really is ROI got me interested and it doesn't hurt that the writer uses a computer as an example, coincidence or divine intervention *grins*?

I've heard and seen the term ROI more than a few times already, specially during those days when I was all about getting a franchise, I never really took time to ascertain the facts back then and, obviously, I didn't plunged on franchising, either; yes, I chickened out *lol*.

ROI is an acronym for Return on Investment but there is more to it than that, business people tend to base their decisions on acquiring new assets by studying its ROI. In buying a computer for example, ROI isn't calculated base on its purchasing cost alone but on the possible cost of repairs, its production and its lifespan. If a big company wants to buy a new set of a single computer and its cost is 1000 bucks, the production that it will input needs to equal that amount to justify the need to buy it, that's one point of consideration in ROI. Other points involve are the cost of repairs and its recurring productivity, when the warranty of that said computer ended, its ROI is now base on the two points I've mentioned, when the cost of repairs and the lack of productivity begins, the computer will then become a liability instead of an asset, and that is negative ROI, a big no-no in business.

The article is written to explain how ROI works in big companies but when you dwell in the matter, it doesn't really matter if your business is big or small as the input and idea it conveys works just as well. Actually, it got me thinking, I need to check how the cafe is doing and how each PC is performing as we are nearing our third month and some of the parts/hardware of those computers only have three months in warranty. I, also, think that saving a fraction of our income each month for future repairs is a good idea, I need to talk to hubby later about that.

I think, I am another step closer to my goal *smiles*...


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