Did it pay off?
Return on investment, or ROI, answers one plain question: for every unit of money you put into something, how much more did you get back? A new laptop that let you take on extra work, a month of ads, a course, a batch of stock for a market stall. Each one cost something, and each one brought something back.
Enter the two amounts and this calculator shows the gain and the ROI as a percent. Add the number of years and it also shows the ROI per year, which is the fair way to compare a project that took six months with one that took three years.
How to use the ROI calculator
- Enter the amount you put in. Count everything it cost: the price, setup, fees and the paid hours of anyone who worked on it.
- Enter the total amount you got back, including the money you started with. If something cost 5,000 and brought in 6,500, enter 6,500.
- If you know how long it took, add the years. Use decimals for shorter spells, like 0.25 for three months.
- Read the ROI, the gain or loss, and the ROI per year.
The ROI formula
ROI = (amount back − amount put in) ÷ amount put in × 100
ROI per year = (amount back ÷ amount put in)^(1 ÷ years) − 1The first line is the classic return on investment formula. It ignores time completely, which is its main weakness. The second line spreads the result across the years as a steady rate that builds on itself, so a 30% return over two years becomes about 14% a year, not 15%.
Worked example: equipment that paid back 6,500
A photographer spends $5,000 on a lighting kit. Over two years, the extra jobs it makes possible bring in $6,500.
- Gain: $6,500 − $5,000 = $1,500.00
- ROI: $1,500 ÷ $5,000 × 100 = 30%
- ROI per year: 1.3^(1 ÷ 2) − 1 = 0.1402, so 14.02%
The kit returned 30% in total, or 14.02% a year. Checking it: 1.1402 × 1.1402 = 1.30, so two years at that rate turn 5,000 into 6,500.
Reading your result
| ROI | What happened |
|---|---|
| Above 0% | You got back more than you put in |
| 0% | You broke even |
| Below 0% | You got back less than you put in |
| −100% | Nothing came back at all |
| 100% | You doubled your money |
There is no single good ROI. A quick marketing test might aim for a few hundred percent, while a slow, steady project might be happy with far less per year. Compare the per-year figure with your other options for the same money and time.
Common ROI mistakes
- Counting revenue instead of what came back to you. If an ad campaign brought 10,000 of sales but the products cost 6,000, only the 4,000 gross profit is the return.
- Leaving out your own time. Ten hours spent setting something up have a cost, even if no money changed hands.
- Comparing totals over different lengths of time. Use the per-year figure for that.
- Treating ROI as a promise. It tells you what happened, or what would happen if your guesses are right. Use cautious numbers when you plan.
Frequently asked questions
How do I calculate ROI?
Take what you put in from what you got back, divide by what you put in, and multiply by 100. Spending 2,000 on a campaign that brought back 2,600 is 600 ÷ 2,000 × 100 = 30% ROI. Enter both amounts above and the calculator shows the gain or loss and the percent, with each step written out.
What is the rate of return formula?
The simple rate of return is the same as ROI: (end value − start value) ÷ start value × 100. To compare things that took different amounts of time, turn it into a yearly rate with (end ÷ start)^(1 ÷ years) − 1. The CAGR calculator uses that same formula for growth over several years.
Can ROI be negative?
Yes. If you get back less than you put in, the ROI is below zero. Spending 1,000 and getting 700 back is a −30% ROI, a loss of 300. The worst possible result is −100%, which means nothing came back at all. The calculator labels a negative result as a loss.
How do I work out marketing ROI?
Use the gross profit from the sales the campaign brought in, not the sales themselves, as the amount back, and the full campaign cost as the amount in. If ads cost 1,500 and led to sales with 4,500 of gross profit, ROI is 200%. Track which sales came from the campaign as carefully as you can.
Why does the ROI per year differ from the total divided by the years?
Because each year builds on the one before. Splitting a 30% two-year return into 15% a year ignores that the second year starts from a bigger base. The per-year figure here is the steady rate that would produce the same total, about 14.02% for that example.
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