ROI: The Complete Guide to Measuring Return on Investment
Return on investment is the simplest way to judge whether money in was worth it. Learn the formula, the traps, and how ROI differs from ROAS and margin.
What ROI actually measures
Return on investment (ROI) answers one question: for every euro or dollar you put in, how much did you get back? It is the most widely used profitability metric because it works for almost anything — a marketing campaign, a machine, a course, a property.
The ROI formula
ROI = (Net profit ÷ Cost of investment) × 100
Where net profit = total gain − cost. A €5,000 return on a €4,000 investment gives a net profit of €1,000 and an ROI of 25%.
Use the ROI calculator to compute this instantly, including annualised ROI over several years.
A worked example
| Item | Amount |
|---|---|
| Ad spend | €4,000 |
| Revenue generated | €6,500 |
| Net profit | €2,500 |
| ROI | 62.5% |
The campaign returned €1.62 for every €1 spent. Whether that is good depends on your margins and your alternatives.
ROI vs ROAS vs margin vs break-even
These metrics are often confused:
- ROI — profitability of an investment (profit ÷ cost).
- ROAS — revenue ÷ ad spend. It ignores your costs, so it overstates results. A ROAS of 4 means €4 of revenue per €1 of ads, not €4 of profit. See the ROAS calculator.
- Gross / net margin — profitability of sales, as a percentage of revenue. Use the gross margin calculator.
- Break-even — the sales volume at which you cover costs. Use the break-even calculator.
A healthy business watches all four: ROI to choose projects, margins to price, ROAS to optimise ads and break-even to set sales targets.
The traps of a single-number ROI
- Time is ignored. A 20% ROI over one year is far better than 20% over five. Annualise it.
- Hidden costs. Time, tools, opportunity cost and risk are often left out.
- Survivorship bias. We remember the wins, not the failed campaigns.
- Cash flow vs accounting profit. A profitable project can still starve you of cash.
How to use ROI properly
- Compare like with like: same time horizon, same cost basis.
- Use it as a ranking tool, not a guarantee.
- Pair it with risk and liquidity considerations.
- Recalculate after the fact to learn what actually happened.
Calculate yours
Enter your gain and cost into the free ROI calculator — instant results, no signup, everything runs in your browser.