ROI (Return on Investment)
You're about to spend $8k on a CRM or $3k/month on a hire. Will it pay off? ROI (return on investment) is the profit or value generated from an investment, expressed as a percentage. It's the lens for deciding whether a scaling investment is worth it. You don't need a finance degree—you need a clear assumption about what comes back and the discipline to check it later.
Same investment, two stories. Hire at $50k/year (all-in with labor burden). If they free 15 hours per week of your time and your time is worth $200/h, that's $156k of value per year. ROI = 212%. If those 15 hours go to "I'll figure it out" and you only use 5 for high-value work, value = $52k. ROI = 4%. The investment is the same; the return depends on how you use what you free. Making the assumption explicit—and reviewing it in 6 months—is what ROI thinking does.
Rough is fine. Directional is the goal. Write down: cost, expected return, and when you'll check.
How to use it
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State the full cost. Not just salary or subscription—include onboarding time, your management time, tools, and labor burden if it's a hire. Many founders underestimate the real cost.
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State the expected return. "This hire frees 12 hours/month. I'll use 8 for strategy and 4 for business development. My hour is worth $X. Return = 12 × $X × 12 months." Or: "This tool saves 2 hours per proposal. I do 4 proposals/month. Value = 8h × $Y per month." Be specific enough to test later.
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Check in. At 6 months (or the payback period you chose), ask: did we get the return we assumed? If not, either fix the use of the investment or change the plan. ROI is a discipline: revisit at your chosen interval.
What breaks
No assumption. "We need a CRM" without "and it will do X so we gain Y" means you'll never know if it paid off. Write the assumption before you buy.
Never checking. ROI is only useful if you revisit. Set a date. Did we get what we expected? If not, learn and adjust.