Return on Investment: Illustrated (Understood)

Ah, the beauty of a good diagram. Picture = 1000 words.

We’re familiar with the term ‘return on investment’ or ROI. Have you ever thought through the relationships of the elements that make up ROI? Neither have I.

Here is the chain of formulas that build the ROI equation:

  • ROI = Profits / Investment, and…
  • Profits = Sales x Margins, and…
  • Margins = Price – Cost

Take a look at this same relationship illustrated…

I’m almost excited about ROI when I view this diagram. I “get” it now. ROI isn’t just about your PR budget as it relates to an increase in sales… You can see that margins, costs, and price are also factors.

It’s not rocket science… but illustrated… ROI becomes something easier to grasp.

Use this example to break down and tackle challenges. Draw them. Don’t worry, they needn’t be fine art. Discover relationships between the parts.

Transforming your problem into pieces you can view and maneuver will help you reveal the solution.

[click on diagram to download a larger PDF]