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Business Travel & ROI – How to Measure Return on Investment for Business Trips

by travelonbiz   ·  11 months ago   ·  

Business travel was terribly affected by the 2007/8 international monetary crisis.

Business reacted to strict credit terms and extreme markets by slashing invest in locations they believed would not hurt their core organization.

Cutting back on staff training and business travel appeared like a more appealing short-term option than decreasing production or making staff redundant.

But it wasn’t.

Lowering face-to-face contact with customers had adverse results on numerous business.

They, as a result, resumed business travel but maintained their concentrate on cost.

The experience triggered some to try to link costs on business travel with the organization advantage, widely termed return on financial investment (ROI).

But how can we measure ROI on something that can have so many faces?

The strenuous method to measure ROI when talking about Business Travel

This might be due to the fact that it’s hard to determine properly the inputs and outputs.

To genuinely link investment and advantage, a rigorous method is essential.

Investment is the purchase of something today to create wealth in the future.

This can either be a tangible item that the buyer believes will appreciate in value (for example, shares or a Picasso), or costs on development that will increase the capability to generate income (brand-new devices for a factory, for example).

It is the latter category that people are normally thinking of when they seek to assess the ROI in business travel.

After all, many business trips are carried out to drive sales development.

It is very important to keep in mind, however, that simply as there are 2 kinds of investment, there are, broadly speaking, 2 kinds of trips.

Some things have to occur as the natural course of the service. Then there is the discretionary invest that you have more control over.

Sending out a team to an oil rig is a cost of doing service and is not optional. It will not generate more profits, however, it is needed to fulfill existing service responsibilities.

This type of travel might be considered fixed expenses, and the one that can be more discretionary might be believed of as a variable.

In evaluating return, many would approach the previous as trying to maximize worth (state, productive hours per $100 of travel investment) from the spend.

However the latter could be thought about a financial investment, and any incremental incomes generated as a repercussion thought about the return on that financial investment.

The wider view

Business Travel cannot be looked at in isolation from the trip’s goal.

Knowing the reason for travel is critical to being able to evaluate the return.

At its crudest, there is the department between external (client-facing and generally considered to be vital) and internal (within the business and typically believed to be a ‘great to have’ instead of a ‘need to have’) travel.

Some types of organization activity are simpler to match cost-to-benefit than others.

Tasks will have been assembled with their own budget plans and travel will have been consisted of within that budget. Some companies have project-related service so it is easier to quantify and recognition is necessary.

In the end, we must examine how we see business travel. Rather than simply taking a look at minimizing expenses, we need to be thinking about developing services. If we begin seeing travel in this way it will be simpler to connect the investment with the return. Then you can do a basic estimation of the expense of travel of individuals going on client-facing trips versus customer profits.

Business Travel should be seen as an expense of sale. And every company has a method of computing the cost of sale. Travel is (or should be) just one element.

Examining the value and ROI of Business Travel

There is a universal belief that the responsibility for evaluating value lies with the business.

Businesses are measuring trip expense, however, the outcome would be different according to company and sector.

Journeys can have different expenses according to the class of travel, carrier or time of travel and, as a result, various returns as so do individual visitors with their different per hour rates and objectives.

Who’s making the choices?

The most significant barrier to linking Business Travel and ROI might lay in where the travel program decision-making sits within a business.

The finance and procurement departments’ natural objectives are to lower or contain expenses, while a managing director or Chief Commercial Officer would be trying to find opportunities for income development.

A good idea would be to separate travel that is needed to maintain an organization from that which is undertaken to grow the business.

The natural result of this may be to have one Corporate Travel Policy for internal trips handled by procurement while having another, managed by sales, for client-facing travel.

Obviously, there are methods of measuring return beyond sales revenue.

Along with the travel cost of any journey, there is the cost in time of a worker being sent out of the workplace– shouldn’t that time be as productive as possible? The ROI can be increased with easy methods such as planning fewer journeys, for a longer time or more meetings per trip.

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