How to Invest Your $20 for the Best Return
Today you’re given $20 and you must invest it wisely. You’re on the board of directors for the WYSE company, What You See Is Exactly What You Get. What would you do? How will this investment help your company grow? Should you invest in a new product, advertising campaign, or expansion? Where could you get the best return on your money?
You don’t have much time to figure out what to do with your $20. But we can help! Let’s crunch some numbers and see how we can get the most bang for our buck!
WYSE Company Background
The WYSE company has been around for 20 years. They’ve had their ups and downs throughout the years, but overall, they’ve had steady growth. Their main product is a device that enables people with visual impairments to use computers more easily.
They also have a few other products that serve a similar purpose for individuals with hearing impairments. Their products are sold worldwide. The main question for the board of directors is, Should we expand our product line?
Option 1: Run an Ad Campaign
Ad campaigns are a great way to get the word out about your product and generate sales. But they also cost money. We could invest in an ad campaign. But what would it cost? And how many sales would it generate?
Let’s say an ad campaign would cost us $20,000. How many sales does this generate? We look at the sales curve for the product. There are lots of different ad campaigns for the product. The best one is an ad campaign that will run on TV, billboards, newspapers, and magazines. This ad campaign will yield 3,500 sales.
Ad Campaign Cost: $20,000
- Sales Generated: 3,500
- Sales per $20 spent: $0.80
- Return on investment: $0.80/$20 = 32%
Option 2: Create a New Product
Let’s say we create a whole new product. Will this generate sales? We know that if we create a new product, we risk cannibalizing our existing product line. What would a new product cost us? And how many sales would it generate?
And what would be the return on our investment?
- New Product Cost: $20,000
- Sales Generated: 1,500
- Sales per $20 spent: $10
- Return on investment: $10/$20 = 50%
Option 3: Hire New Employees
We could hire 3 new employees for $20,000. These employees might help our existing employees do more, which could boost productivity. Or, they might be employees that are working on a new product. What would hiring these employees do for our sales? And what would hiring these employees do for our profits? What do these employees cost us?
- Hiring Cost: $20,000
- Additional Sales: 4,000
- Additional Sales per $20 spent: $10
- More Profits: (4,000 * their salaries)/2 = $2,000
- Net Profit per $20 spent: $8,000
- Return on investment: $8,000/$20 = 400%
When investing your $20, you want to make sure you’re getting the best return on your investment. You want to invest in something that will generate a lot of additional sales, but also make sure you’re making a profit. You also want to make sure your investment is sustainable.
Depending on the situation, any one of these options can be a good investment for your company. But if you want to make sure you’re getting the best return on your investment, hire new employees.