What Is ROI?
ROI (return on investment) measures the profit an investment generated relative to what it cost, expressed as a percentage. Unlike ROAS, which compares total revenue to spend, ROI isolates the profit above and beyond the original cost — the number that actually matters for deciding whether an investment was worthwhile.
ROI applies far beyond advertising — it's a general business metric for equipment, projects, and hires — but the same formula works for judging a marketing campaign's profitability too.
ROI Formula
Subtract cost from revenue, divide by cost, then multiply by 100.
ROI = ((Revenue − Cost) ÷ Cost) × 100
Worked Example
An investment of $1,000 generates $4,000 in revenue.
ROI = (($4,000 − $1,000) ÷ $1,000) × 100 = 300%
What Affects ROI?
- Cost efficiency — lowering the cost of the investment for the same revenue outcome raises ROI directly.
- Revenue generated — anything that increases returns without a proportional cost increase improves ROI.
- Time horizon — ROI on its own doesn't account for how long it took to realize the return, which is why it's often compared alongside payback period for longer-term investments.
- What's included in cost — including or excluding overhead, labor, or platform fees changes the ROI figure substantially, so consistent cost accounting matters when comparing ROI across investments.
ROI Calculator FAQ
How is ROI calculated?
ROI is calculated by subtracting cost from revenue, dividing by cost, then multiplying by 100: ROI = ((Revenue − Cost) ÷ Cost) × 100. A 300% ROI means you got back 3x your investment as profit, on top of recovering the original cost.
What's the difference between ROI and ROAS?
ROAS compares revenue to spend directly (Revenue ÷ Spend), so a 4x ROAS means $4 back for every $1 spent, including the dollar you started with. ROI measures profit above the initial cost: a 4x ROAS equals a 300% ROI, since $3 of the $4 is profit and $1 is the recovered cost. See the ROAS calculator for the revenue-to-spend ratio directly.
What counts as a good ROI?
It depends on the investment's risk and time horizon — a marketing campaign, a piece of equipment, and a long-term project all have different reasonable ROI expectations. Compare against your cost of capital and alternative uses of the same budget, not a fixed universal benchmark.
Can ROI be negative?
Yes — a negative ROI means the investment returned less revenue than it cost, resulting in a net loss. This calculator assumes revenue and cost are both entered as positive numbers; if revenue comes in below cost, the calculated ROI will be negative, reflecting that loss.