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Any person involved with an organization that requires spending your own funds or asking others for theirs, should have a solid understanding of RETURN ON INVESTMENT (ROI). It is is an integral tool in determining what decisions to make that affect overall profitability and return on time and dollars spent. Yet it is shocking how many people do not thoroughly understand the concept of ROI.

Simply stated, ROI is a measurement of how an organization uses its available resources to generate more income. But actually calculating an accurate return on investment is not an easy thing to do. One must track the investment whether it is time or money that point to attracting sales or winning races. Once you have done this you will start to see how much return those efforts put back into the organization. Used as a standard reference to set a profit goal, ROI is often framed in percentage values – equivalent to net profit divided by net worth.

In an organization that is simply looking at profit and losses, their payback is the total amount of money earned from the investment that they make with your organization. Investment relates to the amount resources put into generating the given payback. You should take into account all factors relating to the profitability of your organization and that of organizations that you might call on. Most people, including small business owners (parents of racers) make the mistake of not including their time as a resource and an investment into the organization. An honest examination of your organization and its goals both short term, long term and financial should be done on a monthly basis and annual basis.