How to calculate ROI
Return on investment (ROI) shows the gain or loss from an investment relative to what it cost.
The ROI formula
ROI = (net return ÷ total investment cost) × 100
If an advertising campaign costs £500 and generates £800 of attributable profit, the net return is £300. £300 ÷ £500 × 100 = 60% ROI.
Use total investment cost
Include setup fees, direct labour, software, delivery and other costs necessary to get the result. Omitting costs makes ROI look better than it really is.
ROI is not the whole picture
Two investments can have the same ROI but take different amounts of time or carry different risks. Consider cash flow, payback period, capacity and repeat custom too.
Frequently asked questions
Can ROI be negative?
Yes. A negative ROI means the return was less than the investment cost.
What is the difference between ROI and profit?
Profit is the cash amount left after costs. ROI expresses that gain or loss as a percentage of the investment.