ROI-calculating accurately

The phrase "return on investment" (ROI) is thrown around a lot, but do you know what it really means and how to calculate it?

Three ways to calculate ROI
Cash-on-cash If $20,000 is invested and it grows by $10,000, it’s a 50 percent cash-on-cash rate of return, which is great for wealth building.
Total amount of investment If you put $20,000 down for a $200,000 mortgage, the growth is happening on the $200,000, not what you originally put in. This is arguably less relevant because the amount made on what was originally put in is more important and helpful.
Lost opportunity cost When you’re looking to raise money with another person’s money, you need to demonstrate the loss he could incur if he doesn’t invest. If you have an investment that pays a 20 percent interest and the lender has money in something that only pays 5 percent, you need to show him how much he is losing if he passes up your opportunity.

What the rich do that we don't
The rich develop a wealth building niche that allows them huge rates of return on what they do—real estate, investing in the market, your day-to-day business. Once they make the money, without fail, the wealthiest of the wealthy buy bonds, key bills or some other type of fund that pays a return of three percent to five percent. They want to protect their principle. They only roll the dice in an area of expertise where they can expect a safe return.

Smart Yearend Planning-Planning for the next year

There are three main areas we need to keep in mind as the year ends:
1. Taxes
2. Corporate formalities
3. Planning for next year

Planning for the next year

a)    Operations—What are one or two areas of your business that can be improved? How can you improve your service, stay in better touch with clients, close the gaps in your system? Ask your customers, clients and employees for suggestions. People like the fact you ask, even if they don’t have suggestions. For constructive feedback, you need an environment where people can take criticism or self-critique, not pointing fingers but rather give non-accusatory feedback.
b)    Marketing—Make it a goal to adopt one new marketing strategy or lead generation strategy per quarter for the next year.
c)    Steams of income—Add one or two more streams of income for the next year. If you flip property, try hanging on to one or two to rent. If you have a Web marketing business, add one or two new products or services.
d)    Joint Ventures or product—Many of you have a product or book in you.

Tie up loose ends and hit the ground running at the yearend. Write down your goals now and about halfway through the year. Revisit what you wrote down—you will be stunned at how much you’ve accomplished.