ROI Calculator
Calculate your Return on Investment to evaluate whether a business decision, marketing campaign, or capital expenditure is paying off.
Initial capital invested or total spend
Revenue generated from the investment
Ongoing costs (optional, excluded from investment)
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How to Calculate Return on Investment
Return on Investment (ROI) is the most fundamental measure of investment performance. It tells you how much profit or loss you've made relative to what you put in, expressed as a simple percentage that anyone can understand.
The ROI Formula
ROI = (Net Profit / Cost of Investment) × 100. Net Profit equals the total revenue generated minus all associated costs (operating costs, cost of goods sold, and the initial investment itself). The result is a percentage — positive means profit, negative means loss.
Common Use Cases
ROI is used to evaluate marketing campaigns (was the ad spend worth it?), capital investments (should we buy new equipment?), market entry decisions (is this new market worth pursuing?), and hiring decisions (does adding headcount increase profit?). It provides a common language for comparing very different types of business decisions.
Limitations
Simple ROI doesn't account for time, risk, or opportunity cost. A 50% return over 5 years is very different from 50% over 6 months. For time-sensitive comparisons, consider using annualized ROI, IRR (Internal Rate of Return), or payback period alongside basic ROI.
Frequently Asked Questions
- What is ROI (Return on Investment)?
- ROI is a financial metric that measures the profitability of an investment relative to its cost. It is expressed as a percentage: ROI = (Net Profit / Investment Cost) x 100. A positive ROI means the investment earned more than it cost, while a negative ROI means you lost money.
- How do you calculate ROI?
- ROI = ((Revenue - Costs - Investment) / Investment) x 100. For example, if you invested $50,000 and generated $120,000 in revenue with $30,000 in operating costs, your net profit is $40,000 and your ROI is 80%.
- What is a good ROI?
- A 'good' ROI depends on the context. For stock market investments, 7-10% annually is considered average. For business investments, anything above 15-20% is generally considered good. For startups, investors typically look for 10x+ returns (1,000%+ ROI) to offset the high risk of failure.
- What is the difference between ROI and ROAS?
- ROI (Return on Investment) measures overall profitability including all costs, while ROAS (Return on Ad Spend) specifically measures revenue generated per dollar of advertising spend. ROAS = Revenue / Ad Spend, while ROI = (Net Profit / Total Investment) x 100.
- Can ROI be used to compare different investments?
- Yes, ROI is one of the most popular metrics for comparing investments because it normalizes returns as a percentage, making it easy to compare opportunities of different sizes. However, ROI does not account for time — a 50% ROI over 1 year is much better than 50% over 10 years. For time-adjusted comparisons, use annualized ROI or IRR.