Do You Calculate ROI Before Purchasing Physical Products?
Like many people in the crypto space, and even more in the financial arena, I am interested and follow various metrics for my financial investments. One of them is the return on investment.
I imagine most people reading my blog know what ROI is, but let's add here a definition of it from Investopedia:
I don't really want to talk about ROI in this post. I had done that on other occasions.
What I'd like to talk about instead is what you calculate ROI for.
After a pretty long conversation I had today with someone, I've realized that I am more inclined to calculate ROI for financial investments, rather than physical ones.
I am not involved in real estate, otherwise, that would likely be a domain where I'd want to know after how many years I get my investment back.
But for smaller physical investments I didn't have this habit of calculating, where possible, after how many years I get my money back, and to decide if it's worth investing or not based on that number.
It was mostly a decision based on wants or needs, but not going into details regarding costs versus benefits long term. That's only half true. If we take a new fridge, its power consumption is pretty high on the list of things to check. But for a vacuum cleaner, I have no idea how much power one would use because I never check that when I purchase it.
Here's an area where the guy I talked to convinced me it's very important to calculate ROI: when choosing the heating system and whether to switch to a new one or continue with the one you have (or upgrade it). Something important I haven't considered for example, in all cases: they all have a limited time of functioning within parameters or until they break down. So, in the case of a heating system, is a new one more profitable than the old one? If yes, does it return the investment in a short enough time that you still enjoy the higher profitability until it "expires" (or until you change it again)?
That's a sound judgment, I must admit.
This is one example, but we can find more if we keep thinking in ROI terms. This guy certainly thinks this way.
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I dont use ROI with physical products and I think many of us don't do it generally. But I believe its a good practice if followed.
@sagarkothari88 vote
I agree. I need to follow this example more often, especially since it's very close to me and I can clearly see the results of applying this practice.
It's may be good but I haven't used
I haven't either, at least not all the way, and to the extent this guy is doing. But I can see results for him.
Well, I don’t get to calculate ROI when buying products but thank you for your explanation and I hope I begin to do that
I haven't calculated it either until now. Maybe a few times. But if you do it constantly, it seems to work. This guy is an example. Of course, not all people can be like him (or enjoy it). One needs to be very organized and research a lot before taking action to make this work.
I remember when my parents told me the monthly consumption of their freezer... I did the calculations and found out that if they bought a new one, they would ROI it in 6-7 months... They did it and it was a salvation for their budget!
It's amazing how the old one had bad insulation and because of that, was consuming some crazy amount of kWh!
Wow! That's a fantastic number. Always worth taking an investment with such a low expected time to return the investment!
My parents have an old freezer too. I told my father they should get a new one, but they haven't so far. I need to find out how much power that consumes to make a similar ROI calculation with for an investment in a new one.
When I was ETH mining, I bought something like this:
https://www.ebay.es/itm/364678176069?itmmeta=01HPNZHF58BTX971CWZZH2YVYP
And use it to check out the consumption for my mom's freezer... :) Maybe some of your friends have that and can borrow it...
That's a great thing to have! Thanks.
I hardly put it into consideration though but I must say it is actually needed to put roi into consideration form now henceforth
I don't use ROI for physical stuff and more for investments. I guess it does factor a bit in for things like cars but I kind of prefer the new stuff. It's because it's likely to have less issues since I didn't have very good experience with used cars. They break down way too often.
Yes, cars are another example where people think if it's worth buying it and weigh various options more seriously because it's generally a bigger purchase. For most people, it's just a matter of how big of a liability a car becomes, because it's not an investment that can make it profitable.
I think I am similar to you, in that I compute ROI mostly on financial investments. I do think of ROI when the values are easy to get. For example, setting up a solar panel on one's house. One can get the total cost of the installation, and the estimated savings per month. But I don't calculate the ROI of things like a bed, or a car, or something whose benefit is hard to quantify.
Yeah, I don't think you can calculate ROI of a bed... generally. You need to produce something quantifiable to be able to calculate ROI. Task could probably think of something, the way his mind operates. 😂
On a serious note, if a bed offers better sleep than the old bed and you can be more productive for potentially a longer time, then maybe you can calculate something. But likely not before you buy it and see the increased productivity. Unless you had the chance to test it somewhere and see the improved results before buying it.
Thank you for humoring me 😂. For what it's worth, I also did think about how to compute the ROI of getting a bed. I was thinking about how long the sleep was compared to before, deep sleep, how refreshed/rested one is after sleeping, etc. Then how those translated to productivity and energy throughout the day. Not buying coffee, can be a tangible saving, finally making use of the gym membership can be another. There are a lot to consider haha.
There you go, you thought of even more ways to cut costs after buying a better bed.
Like the way the guy thinks. In terms of physical products, it reveals something that many tend to overlook or not even know much about, which is when it's time to switch to a new one or upgrade the existing one. I think it's a great way to minimize unnecessary spending.
Yes, he does that very well even if he earns well above average. He may be blunt and has other faults, but has grown a lot in various areas during all the years I've known him.
I think I really need to pick this financial advise and I am so sure to work on this. I hardly consider the ROI
All of us must think about it. When I buy something, I must think about how much profit there will be in this thing.