ROI

Return on investment (ROI) deals with the money you invest in a company or service and the return you realize on that money based on the net profit of the business. Plumbers are looking to get a return based on the money they invest in Scorpion.

Net Profit

Net profit, also referred to as the bottom line, net income, or net earnings is a measure of the profitability of a venture after accounting for all costs.

Gross Profit

Gross profit is a company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Service Values

Each job or service will have a specific set value to your client, uncover those values in order to calculate a true return for your client

 

Example Case Study

To illustrate what calculating a client’s return on investment looks like, we’ll use Troutman Plumbing as an example.

 

This plumbing company has 2 technicians that require about 5 booked appointments 5 days a week. Their monthly online investment with Scorpion is $6,000 and they are hoping for a 4X return.

How to Calculate ROI

Let’s think, how much money would Troutman Plumbing need to profit in order to reach their desired 4X return?

$30,000
Gross Revenue

How to Make  Clients Happy

Make Them Money

How do we do that? Produce leads that convert into paying clients. Clients = Money!

We’ve learned that our target gross revenue is $30,000. In order to reach that, we need to gather the information necessary to determine how many leads we’ll need in order to produce the return Troutman Plumbing is expecting.

Average Job Value

Estimated Revenue

Closing Rate

Estimated Gross Revenue

We’ve learned that our clients average job value is around $500 and that they close 25% of the inquiries that they receive. Based on those two numbers, along with the fact that we know our client needs to gross around $30,000 to get their 4X return, we understand that they need at least 240 leads in order to reach their goals. Let’s do the math!

Requisite Leads

What if we wanted to work backwards? Let’s review how to use the same equation differently depending on the information you have available.

$30,000
Clients ROI
Goal

/

$500

Average Job Value

=

60

Jobs Needed

/

25%

Close Rate

=

# of Leads Needed for ROI Goal

240

Keep in mind, although our clients may feel their close rate is consistent, it’s not uncommon for it to fluctuate. We always want to under-promise and over-deliver. Make sure your calculation includes padding to account for those inconsistencies.

Cost Per Lead

Why is this important to understand cost per lead? Even if our leads are converting into jobs, the cost of those leads has to be worth the clients initial investment.

$6,000
Marketing Investment

240

Number of Leads

/

Cost Per Lead

=

$

25

Two More Handy Formulas

Use these formulas to calculate Cost Per Click or Cost Per Acquisition.

$6,000
Marketing Investment

650

Number of Clicks

/

Cost Per Click

=

$

.

923

$6,000
Marketing Investment

60

Number of Jobs

/

Cost Per Acquisition

=

$

100

Revenue and Marketing

Let’s learn how to calculate your clients return on investment, but first, a little review!

ROI

Gross Profit

Net Profit

Service Values

------------------

This is a 4x return on their investment.

$6,000

Marketing Investment

ROI

-

=

$

24000

,

Investment Math Made Easy

Let’s review some numbers and figure out exactly what we need in order to reach our clients financial goals.

240
Number

of Leads

25%

Average
Close Rate

x

60

Jobs Booked

=

$500

Average
Job Value

x

Estimated Gross Revenue

=

$

30000

,

Begin the next Lesson