Business Travel and Return on Investment
June 22, 2021
In the past (pre-COVID) travel was essential for many businesses. As the global pandemic grew in intensity, commerce in the U.S. as in other countries came to a virtual standstill. Businesses in order to remain viable had to pivot their operations to a new normal that included a complete travel shutdown for those businesses previously accustomed to travel as a normal part of their operation. As employees were forced to work remotely, Zoom and Skype calls replaced travel.
Now that the U.S. and many other countries are heading into a post-COVID period, a decision for many businesses is whether to return to pre-COVID travel policies or introduce new policies while still seeking to achieve pre-COVID sales and net profit goals. The deciding factor for any business decision (marketing, travel, location, employees, products, services, etc.) is what effect that decision will have on the bottom line (net profit) of the business. For the past 12 plus months, businesses that relied on travel to generate sales had to adjust to other forms of communication rather than face-to-face communication. Presentations, product discussions, and contract negotiations were all accomplished remotely.
Decisions made post-COVID are the same as pre-COVID...what effect will a particular decision have on the bottom line. What is the return on investment (ROI)? If travel is initiated, will sales and net profit increase when comparing pre-COVID and post-COVID periods? The calculation can be quite simple. What additional travel expenses will be incurred and what additional revenue and net profit will be produced?
Each business will be different regarding the ROI on new travel. Those businesses that had travel expenses pre-COVID should analyze how they now operate post-COVID and the role that travel plays not just in ROI but other variables such as customer satisfaction and retention, relationship building, branding, prospecting, etc.
Travel vs. Rewards
Small businesses and SMEs have always had to consider the cost of travel versus the rewards. Post-COVID travel decisions are no different from the standpoint of whether travel is essential for a particular business. Travel plays a different role for each business; however, two of the most important factors that a small business or SME should consider regarding travel expenses are: (1) developing relationships and (2) increasing revenue. Developing relationships and increasing revenue are both key ingredients to achieving long-term success in a business. For a small business or SME considering travel expenditures, the question should always be, “Will this expenditure either help develop a business relationship or directly contribute to an increase in revenue?” If the answer is “yes,” then the business should proceed with the planned travel expense. If the answer is “no,” then the expense should be delayed until such time as the travel expense can achieve the goal of either developing a new relationship, enhancing an already established relationship, or increasing revenue with anticipated new orders.
Ensuring a Positive ROI
As with any business decision, analysis and forethought is important before travel expenses are incurred. The decision to travel is not necessarily a complicated calculation. What is the amount to be spent and what is the expected return? Certainly, a fixed dollar amount cannot be placed on the value of relationship building; however, a dollar amount can be estimated related to future sales as a result of enhanced business relationships. Of course, if there are immediate new sales that will be directly attributable to travel, then the decision to travel is much easier to make and easier to calculate the ROI.
Making the Decision
The decision to incur travel expenses is no different than the process made to incur any business expense. Several questions should be asked such as:
- Is the expense necessary?
- Will the expense produce a positive effect for the business?
- How will the expense produce a positive effect for the business?
- What will be the positive effect for the business?
When the answers to the above questions are positive, the decision to travel is automatically made.