I had the chance several times this week to talk with people who are key business partners for me.  This got me thinking:  How do you determine whether you’re getting a great return on your investment?

OK, here’s the mathematical formula:

ROI

For any particular business arrangement, you can calculate this – or at least come up with reasonable estimates.  If I create a win-win arrangement with another company, it’s going to cost me some time and money, and I hope for additional return which handsomely covers those costs with additional revenue coming in.

But this isn’t the whole story.

If we were to be honest, an ROI calculation should include many more, less tangible, factors:

Return:

  • The opportunity you’ll have to spend your time and money on more core tasks
  • Leveraging someone else’s passion and expertise
  • Learning a new area

Investment:

  • The risk of trusting someone else’s decisions
  • The risk of diverging goals
  • Unexpected overhead

You can attempt to quantify these factors, but in many cases it’s just a stab in the dark.  It’s more important to learn from this exercise what you should do to make the partnership more successful.

Here’s an example:  I rely on other experts to do some important marketing work for me.  There’s a key risk in this:  That they’ll forget about me and push my work to the bottom of their list.  I try to prevent this by being in regular contact with them – not just formal meetings, but informal communication as well.  It makes a huge difference.

Go through your analysis, crunch the numbers, and make your decision whether to partner or not.  But remember that the venture really depends more on the intangibles, on attitudes and relationships.  Then work on those, so you can reap the monetary ROI you anticipated.

Advertisements