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Marketing Math: Understanding Return on Investment

Updated on
February 3, 2016

Return On Investment is commonly referred to as ROI. Understanding ROI is critical for growing and maintaining a successful massage business. In a nutshell, ROI means, if I spend $1 on my business, will I get more or less than $1 in return? The best way to explain this is through an example.

Let’s imagine that you bought an advertisement on Facebook for $100. Ten people that saw the advertisement booked an appointment with you. And you charged $50 for each appointment.

So you spent $100, but it led to $500 in revenue. Provided that your cost to treat these clients (i.e. cost of lotions, towels, etc.) did not exceed $400, you made a positive Return On Investment.

But it doesn’t actually end there. That is only your Return On Investment after each client booked one appointment. If you impressed them, and followed up properly, then each of those clients will book several appointments with you over the course of their lifetime. Let’s imagine that on average each new client books a total of ten appointments with you over the course of their lifetime.

So in this example, you initially spent $100 on an advertisement, but it lead to $5000 in revenue. That $100 was a great investment into your business!

While this example is quite optimistic in terms of a return on a $100 investment, what’s important to understand is that it was an investment. And this is where many healthcare clinics develop a bit of a fear. It can be hard to picture how $100 today can make you $5000 in the long-term. It’s important to get over these fears and remember that you are investing in yourself and investing in your business.

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