ROI is the universal metric for "Is this worth it?" It measures the efficiency of an investment and helps you make data-driven business decisions instead of gut-feel gambles.
The Simple Formula
((Net Profit from Investment - Cost of Investment) / Cost of Investment) x 100
Example: You spend $1,000 on Facebook ads. Those ads generate $1,500 in sales with $200 in product costs.
Net Profit: $1,500 - $200 = $1,300.
ROI: (($1,300 - $1,000) / $1,000) × 100 = 30% ROI.
What ROI Numbers Mean
- Positive ROI: You made money. The higher, the better.
- 0% ROI: You broke even. You got your money back but made no profit.
- Negative ROI: You lost money. Time to pivot or cut the expense.
Common ROI Calculations for Small Business
- Marketing ROI: Did the ad campaign generate more revenue than it cost?
- Equipment ROI: Will the new machine increase output enough to pay for itself?
- Employee ROI: Does the new hire generate more revenue than their salary + benefits?
- Software ROI: Does the tool save enough time to justify the subscription?
Use our ROI tools to run quick calculations before making any major business investment.