For today’s Reader Mail, we’ll talk about how to do a simple computation of the business ROI and how to manage and grow a retail business.
Specifically featured are two emails I received from a couple of enterprising individuals. The first one is set to start a gasoline station business while the second one wants to grow their sari-sari store business.
Let’s now read their letters and I hope you can learn some business tips from my replies.
Please note that the senders have been made anonymous to protect their privacy and some details have been edited for purposes of clarity and brevity.
Hi. I am putting up a gas station and this is the first time that I will be dealing with a more “structured” business venture. more structured in the sense that I have other investors which are family members as well.
I have been running a transportation business but in an informal kind of way. This time around I have to make the forecasting, ROI and the like.
Hence, I would like to seek your expertise on how to do about this. I am making a business plan and I hope you can provide me with a template and a sample ROI computation. Many thanks and more power!
Hi. Are you franchising the gas station? If so, I’m sure your gasoline supplier or franchiser can help you with details on how to manage the business, specially the data that you need to monitor and analyze.
However, when it comes to ROI computation, it’s always good to start with a simple and general approach.
First, list the start-up costs and the expected monthly (overhead) expenses. Be as detailed as you can – consider the licensing and business permit registration fees aside from the leasehold improvements and others for the start-up costs. And include a depreciation cost and a modest miscellaneous costs for the monthly expenses.
Second, do a survey of your planned location – determine how many customers you can conservatively get in a day. This will give you an idea of your gross daily sales and the net daily income (profit)
So as an example, let’s say that your start-up will be 2 Million and the projected monthly expenses will total P500,000. Then we have these rough estimates with regards to your sales and income:
Estimated gross daily sales: P100,000
Estimated net daily income (assuming you earn P20 for every P100 of gas): P20,000
Estimated net monthly income: P100,000 (20,000 x 30 days less monthly expenses of 500,000)
What you do now is simply to divide your start-up capital with your estimated monthly net income to get your projected ROI. So in our example, that will be 2 Million divided by P100,000 which equals to 20 months.
In my opinion, less than 2 years ROI is good for a long-term business.
As for the template, I suggest that you search the internet for that as there are a lot of them online which you can use. However, there is really no required template you must follow when doing these. As long as it’s detailed and easy to understand, then you’ll do just fine.
People are talking about this article, join the conversation below.
Interesting article. I wonder whether the gasoline station is the Bulilit franchise being promoted by Petron. Maybe Petron can help you out?
Its inspiring to hear a story of a sari-sari store since 1982. Imagine almost 30 years in business! All I can say is…WOW! I totally agree with Fitz, if it lasted that long there must be something they’re doing which allows the business to endure decades of business challenges.
My suggestion would be to ask your customers what other needs they may have that is currently not being addressed by the sari-sari store…once you identify those “extra” needs, then build your business to satisfy those needs and gain more customers to expand.
Good day. May I know how much will a P300k , P 500k , P 1M worth of business get you? Like a pizza parlor the size of Shakeys Greenhills be worth? Thank you very much.
Your business advise is exciting about ROI (return on investment) on gas station. However, in calculating ROI, here is the simple formula:
Net Income divided by average capital investment (Beg + Ending divided by 2). Apparently the calculated 20 months is called pay back period instead of ROI (the length of time to recover your investment).
For your information.
I would like to ask im also running a business like Sari-Sari Sore
but the problem is almost of the capital (nasa utangan na at wala ng maipang rolling pa)its very hard for me to handle…nahihirapan akong maningil….and aside from that laging promises or na TY nalng lage….mayron po bang security or any legalities na sumasakop sa isang sari-sari store in terms of pautang kasi kawawa naman kaming maliliit na capital.Any advice rin po tungkol sa pagpapa utang?
My personal opionion lang po.. never get involved in pautang system specially in a sari sari store kumbaga parang sasakyan lang yan 4 ang gulung mo pinahiram mo isang gulong mo so paano kapa uusad nun?
The actual profit profit margin for gasoline station is only cents per liter depending on the location, if it has competition nearby the profit margin will be less. Unlike in the 90′s were the profit margin ranges from P1 per liter now it ranges only to 10-35 cents per liter.
Re ROI for gas station,
Perhaps you heard that Franchised gas stations earn not on their core business, but on complimentary business such as rental, servicing and others. This is due to the fact that the margin is minimal. ROI may take up to 7 years
If you are serious of putting up a gas station, id rather suggest that you take a look putting up an idependent gas station.The margin is 200% to 300% than the franchised ones.ROI may take 3-4 years only
Are sales, income and monthly expenses you cited as example to compute the ROI, the average among gasoline franchisee.
I have a financier who is interested to put up business in the Philippines and considering his willingness to invest big funds, we thought gasoline franchise would best fit the significant profit margin. I was given a due date by end of this month, and I hope you could provide more substantial information on gasoline franchise.