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.
Lastly, it may also help to read this: How To Write a Business Plan.