What is Return on Effort and Why Should You Care?
Return on Effort (ROEff) is a handy metric that simplifies understanding how much bang you're getting for your buck when it comes to physical assets, operating efficiency, and stress levels.
Why should you care? ROEff helps you identify whether the resources you're pouring into your business are actually giving you a worthwhile return. More specifically, it answers the question: "Is all this stress really worth it?"
How to Calculate Return on Effort
Calculating ROEff is easier than you might think, thanks to a straightforward formula:
[\text{ROEff} = \text{Turnover from Physical Assets} \times \text{Operating Efficiency} \times \text{Stress Value}]
Where:
- Turnover from Physical Assets: Your revenue generated from physical assets in dollars ($)
- Operating Efficiency: A measure of how well your operations are running. Higher is better!
- Stress Value: The level of stress, typically scaled; a higher value indicates more stress
Just plug in these values, multiply them together, and you get your Return on Effort.
Calculation Example
Let's say you own a midsize factory and you've got the following numbers:
- Turnover from Physical Assets: $15
- Operating Efficiency: 20
- Stress Value: 30
Using our formula:
[\text{ROEff} = 15 \times 20 \times 30]
Doing the math gives us:
[\text{ROEff} = 9000]
So, your Return on Effort would be 9,000. A higher ROEff typically indicates a more efficient use of your resources, so aim high!
| Variable | Value |
|---|---|
| Turnover from Physical Assets ($) | 15 |
| Operating Efficiency | 20 |
| Stress Value | 30 |
| Return on Effort | 9000 |
By breaking down complex metrics into bite-sized, manageable chunks, Return on Effort helps you make data-driven decisions without losing your sanity.