Return On Investment

Return On Investment or ROI is a common accounting term.  It is simply the return or percentage return on an investment.  If someone buys a business for one million dollars and that business generates $100,000 a year in profits, the ROI is 10%. 

I once had a client who was considering buying a small franchise business for $100,000.  The seller was an absentee owner paying a manager a $20,000 annual salary.  The manager was working 60 hours a week.  The business was just breaking even.   I told my client that she would have to increase the profitability of the business, or she was paying $100,000 for a 60-hour per week job that paid $20,000.  She decided the business was not a good option for her. 

If an investment of any kind is made in a business, that investment should generate additional profits.  The increase in profits is the ROI.  A retailer invests $5,000 in a new advertising campaign, and $10,000 in additional sales are generated.  If the retailer has an average profit margin of 20%, the additional gross profits generated by the ad campaign are $2,000.  The additional profits generated did not even cover the cost of the ad campaign.  This was a bad investment if there are no additional residual sales as a result of the campaign. 

See my example of giving cars away at cost in Business Fits.   http://BusinessFits.com

The private sector is very aware of ROI.  Unfortunately, that is rarely the case with the public sector.  The examples of government spending money on things that generate no return on investment are disgusting and all too common. 

There are a few politicians who actually watch the ROI on government spending.  I recently attended a Small Business Summit here in Wisconsin.  I was amazed to see that Governor Walker and his cabinet are aware of the ROI for the way they spent the tax dollar.  Governor Walker actually tries to run the state government like a business.  Amazing! 

The local economic development and tourism groups I am familiar with consider the ROI for any expenditure.  Local government is normally more efficient.

When private corporations, special interest groups, and big money make an investment in a political candidate’s campaign, they expect a return on that investment.  That return may come in the way of loans, grants, subsidies, tax breaks, or special political appointments.  Don’t kid yourself; big money is not making that donation for the good of the country.

Donald Trump admits making large campaign donations to candidates from both parties.  Trump is a very savvy businessman.  He knows how the game is played, and I am sure he received a very good return on investment for those campaign donations.  He could be a game changer.

We are in desperate need of campaign spending reform if we are going to take back our country.  Maybe we should pass legislation making it illegal for any individual, corporation, or special interest group that makes a campaign donation to any candidate from either party to receive federal money in any form. 

Think about this.  Making a campaign donation with this law would eliminate receiving government money or favors. They could not buy politicians, as is now the case.  It would be a real game changer. 

That change might actually help clean up politics and provide the campaign spending reform we desperately need.  Organizations like Planned Parenthood could no longer use federal money to donate to the Democratic Party in order to get more federal money.

I’m probably just dreaming again, but I can hope and pray we can band together and make some real changes to take our country back.