What is ROI? Return on Investment Calculator

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what is ROI?

Some reasons you should know about ROI (Return on Investment) are that:

  • You can discover if what you spend on advertising is working?
  • Is your time worth putting into that particular topic area?
  • Should you spend more on consulting or advertising?

What is ROI?

“Return on investment (ROI) is the benefit to an investor resulting from an investment of some resource. A high ROI means the investment gains compare favorably to investment cost.” According to Investopedia. In the private practice world we might say:

Is this financial or time commitment worth it?

Is it worth it? (aka ROI)

Video transcript

I’m going to show you how to figure out if something is worth your money.This is a blog post I’m working on called the Return on Investment Calculator. You can find it at practiceofthepractice.com/return-on-investment-calculator. Boom!

All right. So let’s look at this. I wanted to just walk you through it a little bit just because it might be a little bit confusing. It’s the first time that I’ve made a calculator. Been working on it. Had a VA in Eastern Europe help with some of the coding and then Aaron from Legendary Lion helped to make it pretty.

All right. So we’re going to start here with the top section. So the average number of sessions your counseling or consulting clients sees you. Let’s run some numbers:

  • So say you are a private practice counselor and someone sees you on average six times.
  • They come for their intake, and then by their sixth session, they usually discharge. So the way you’d figure that out is you look at kind of all your clients maybe over the last six months. How long? How many sessions do they typically come to before they discharge?
  • So say that’s six sessions. Say your rate of reimbursement is $150. That would mean the worth of your new client is going to $900.
  • So 6 times $150. And then also we’re going to want to put total practice sessions per week for the business. So on average, how many sessions do you do a week?
  • And so a good way to do this is to look at last month. How many total sessions did you do? Divide it by however many weeks were in that month. Do that for a couple of months. Figure out exactly how many sessions you do per week.

So say you do 15 sessions per week. That’s going to kind of pull in later on down at the bottom here. So right now, the adjusted weekly worth of a new client is $150. But now we’re going to subtract some of the expenses from it. So my rent, let’s say, it’s $2010 per month. Office supplies, you know, paper, pencils – but I don’t get pencils. Paper, staples. Say we spend like $35 a month on that. Let’s say hosting, all the other things. I’ve quite a bit that I do with my website. So say that’s $200 a month. And then maybe like virtual assistants, other expenses. Say that’s $250 a month. That would mean our cost per client per week is about $38.38 and so from that $15 it’s figuring it out from there.

Adjusted Client Worth

So the adjusted weekly worth of a new client is $111.62 and then now let’s look at investment opportunity. So cost of investment. So this is going to be things like say you want to invest in consulting. Say you want to invest in maybe the local newspaper or some magazine says, “Hey. You know, for $800 you can do XYZ.”

So anything that’s going to cost money that you hope will bring in clients: Google adwords, things like that. So what’s the total cost of it? Not the monthly cost, the total cost. Say you’re going to do consulting and say it’s like over four months. It’s going to cost $2500. And you say, “Well, what if I get three clients out of that?” Then that means it’s going to take seven and a half weeks or so to pay yourself back for that investment opportunity.

So say you get four clients out of it; it’s going to take about five weeks. Say you get two, it’s going to take about 11 weeks. So if you only get one, it’s going to 22 weeks. So this is a great way to figure out. Okay. So if the local newspapers says, “You can do this new ad for $750” and you say, “I hope to get two clients out of that.” Then that means within 3.36 weeks, you are going to kind of pay yourself back that $750.

How to use ROI

So this is a great way to figure out if you reduce your rent, if you reduce some of your cost, if you increase your cost for counseling, your average rate, the average session, total sessions per week, you can tinker with this and figure out exactly what your ROI is on anything that you’re going to buy that’s going to hopefully bring people into the practice.

So for more tips and tricks and really awesome things for your counseling private practice or your consulting practice, head on over to practiceofthepractice.com. We’re doing about three new blog posts a week, have our daily podcast on Become a Consultant Today, weekly podcast on practiceofthepractice.com, all sorts of crazy awesome resources.

Here’s the ROI Calculator for you to use