How to Calculate ROI for a Business Plan
ROI stands for "return on investment." This is a calculation that you must have handy if you plan to write a full business plan. It is a basic calculation, yet a very important one to your planning process because you need to prove that an investment is worthwhile. While you can simply pull up your past numbers for an existing business, it can be a little more difficult to calculate the ROI if you are writing a plan for a new business.
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Instructions
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1
Determine the amount of the investment first: For instance, if your business plan is to sell antique furniture for a profit, your main investment will be the purchasing of the antiques from a dealer or wholesaler. If you paid for an advertising campaign as a way to generate more income, that cost is your investment. Let's use a $20,000 investment in antique furniture in this example.
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2
Estimate the income that you plan to receive as a result of your efforts: If this is a new business, you can use sales data from a similar operation, or you can gather expert opinions on the market value of your items or services. In our example, let's say that you will receive $40,000 income once all the pieces of furniture are sold.
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Subtract your total income from your total outgo (the amount from Step 1) to get your net profit. Then, divide that figure by the amount of the investment (outgo). The result is your ROI. In our example, this is $40,000 minus $20,000, which equals $20,000, divided by your investment of $20,000. The result is one. Multiply that figure by 100 to get the percentage. In this case, the ROI is 100%.
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Expand upon how you came to all of these determinations in each applicable section of your business plan--such as the overall product or service description, marketing (such as advertising cost), or suppliers (where you might discuss the extended price). Summarize these costs and projected income in the "Financials" section of your business plan.
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Tips & Warnings
The formula for ROI is simply "Net profit / Investment x 100".
References
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