Return on Investment Calculator

Calculate ROI for investments, marketing campaigns, or business decisions.

Formula

ROI (%) = ((Net Gain from Investment − Cost of Investment) / Cost of Investment) × 100
Annualized ROI = ((1 + ROI)^(1/years) − 1) × 100

How to Calculate

ROI measures the profitability of an investment relative to its cost. To calculate basic ROI, subtract the cost of the investment from the total return (net gain), divide by the cost of the investment, and multiply by 100 to express as a percentage.

For investments held over multiple years, use annualized ROI to enable fair comparisons. A 50% total return over 5 years is very different from a 50% return in 1 year. The annualized formula accounts for compounding and time, giving you the equivalent annual return.

When calculating ROI for business decisions like marketing campaigns or equipment purchases, be thorough about including all costs (implementation, training, maintenance, opportunity cost) and all benefits (direct revenue, cost savings, productivity gains). Partial or biased ROI calculations lead to poor investment decisions.

Worked Example

A business invests $15,000 in a marketing campaign that generates $52,000 in attributable revenue with $30,000 in associated costs (product, fulfillment, team time).

Net gain: $52,000 − $30,000 = $22,000 in gross profit from the campaign
ROI = ($22,000 − $15,000) / $15,000 × 100 = 46.7%

For a longer-term example: A $50,000 equipment purchase generates $20,000/year in additional profit over 4 years ($80,000 total).
Total ROI = ($80,000 − $50,000) / $50,000 × 100 = 60%
Annualized ROI = ((1 + 0.60)^(1/4) − 1) × 100 = 12.5% per year

Why It Matters

ROI is the universal language for evaluating whether an investment was worth making. It helps you compare disparate opportunities—should you invest in marketing, new equipment, or hiring? By calculating ROI for past investments, you learn which strategies deliver the best returns and can allocate future capital more effectively.

Practical Tips

✓Include all costs—not just the obvious ones—for an accurate ROI (implementation, training, maintenance, opportunity cost).
✓Use annualized ROI when comparing investments with different time horizons.
✓Set a minimum ROI threshold for business investments to maintain capital discipline.
✓Track ROI over the full investment lifecycle, not just the initial period when results are strongest.

Frequently Asked Questions

What is a good ROI?

It depends on the context. For stock market investments, 7–10% annually (inflation-adjusted) is a historical benchmark. For business investments, anything above your cost of capital is positive. Marketing campaigns often target 300–500% ROI. Real estate investors typically aim for 8–12% cash-on-cash returns.

What are the limitations of ROI?

ROI does not account for time (unless annualized), risk, or the time value of money. A 20% ROI on a safe investment is better than 20% on a risky one. For more sophisticated analysis, consider Net Present Value (NPV) or Internal Rate of Return (IRR), which account for cash flow timing and discount rates.

How do I calculate ROI for marketing campaigns?

Track attributable revenue using UTM parameters, conversion tracking, or promo codes. Subtract all campaign costs (ad spend, creative production, team time, tools) and associated fulfillment costs. The formula is: (Attributable Profit − Campaign Cost) / Campaign Cost × 100. Be honest about attribution—not all revenue may be directly caused by the campaign.

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