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Maximize Your Rate of Return on Investment

 

All business success is measured by its annual rate of return on investment:
the greatest net profit on the smallest investment in the least time.

The formula for the rate of return on investment for the development of an electronic product is as follows:
Rate of Return
on Investment 		=
Total Net Profit - Development Cost
Development Cost × Time to Market
 = 
Profit Per Unit × Total Unit Sales - Development Cost
Development Cost × Time to Market
 
Profit per Unit = Sales Price - Sales Cost - Production Cost
Total Unit Sales  =  Annual Volume × Product Life
Annual Volume = Market Share × Available Market
 
Rate of Return
on Investment 		=
(Sales Price - Production Cost - Sales Cost) × Market Share × Available Market × Product Life - Development Cost
Development Cost × Time to Market

Time to Market is the time until the product is sufficiently debugged for volume production and the development team can be redeployed.

Product Life is the period of profitable volume production.

Maximize Your Rate of Return on Investment
The formula for Rate of Return on Investment has four factors: Total Unit Sales, Profit per Unit, Development Cost, and Time to Market. A change in any component produces a change by the same percentage in Rate of Return on Investment.

Changes in two or more components add together. For instance, a 5% improvement in all four factors increases Rate of Return on Investment by about 20%. To maximize your Rate of Return on Investment you must make independent aggressive efforts to Boost Total Unit Sales, Boost Profit Per Unit, Slash Development Cost, and Slash Time to Market.

Rate of Return on Investment is Very Sensitive to Changes in Time to Market
Time to Market affects Development Cost and Total Unit Sales. A 5% decrease in Time to Market can: Since Development Cost, Total Unit Sales, and Time to Market are all factors in Rate of Return on Investment, improvements in each of them add together. Adding the changes from a 5% decrease in Time to Market together:
  • a 5% decrease in Time to Market can increase Rate of Return on Investment by 12.5%!
Rate of Return on Investment is Very Sensitive to Sales Price, Production Cost, and Sales Cost
  • A 5% increase in Sales Price can increase Rate of Return on Investment by 17%!
  • A 5% decrease in Sales Cost can increase Rate of Return on Investment by 5%!
  • A 5% decrease in Production Cost can increase Rate of Return on Investment by 7%!
Industry Standard Product Configurations
Check out how our comprehensive range of products and services optimize each of the factors that determine your annual rate of return on investment:

Slash your Time to Market A 5% decrease in Time to Market can increase Rate of Return on Investment by 12.5%
Slash your Development Cost A 5% decrease in Development Cost can increase Rate of Return on Investment by 5%
Maximize your Profit per Unit and Profit Margin A 5% increase in Profit per Unit or Profit Margin can increase Rate of Return on Investment by 5%
Boost your Sales Price A 5% increase in Sales Price can increase Rate of Return on Investment by 17%
Slash your Sales Cost A 5% decrease in Sales Cost can increase Rate of Return on Investment by 5%
Slash your Production Cost A 5% decrease in Production Cost can increase Rate of Return on Investment by 7%
Maximize your Total Unit Sales A 5% increase in Total Unit Sales can increase Rate of Return on Investment by 5%
Boost your Market Share A 5% increase in Market Share can increase Rate of Return on Investment by 5%
Maximize your Available Market A 5% increase in Available Market can increase Rate of Return on Investment by 5%
Extend your Product Life A 5% increase in Product Life can increase Rate of Return on Investment by 5%


No one is more dedicated to maximizing the reliability of your electronic product than
Green Hills Software
 
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