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How to calculate ROI

Updated February 21, 2017

Calculating the return on investment (ROI) in business is one of the most important calculations a business performs. This calculation allows businesses to determine the amount of business received from investing a certain amount of money and resources. For example, the ABC Company invested £65,000 in an advertising campaign to promote a new service. The ABC Company received 150 phone calls from the campaign and 50 of the callers bought the new service. The amount of new business sold totalled £325,000. The equation to calculate ROI is: ROI = (return on investment - initial investment)/investment * (100)

The first bit of information you need to have to calculate ROI is the return on investment. In this example, the return is £325,000.

Next, you need to know what the initial investment was. In this scenario, the ABC Company invested £65,000 in the marketing campaign.

Now it is time to set up the equation. ROI = ($500,000 - £65,000) divided by £65,000 multiplied by 100.

Once the equation is set up, you can calculate the ROI. In this case, the answer is 400 per cent, meaning that ABC Company has a 400 per cent return on its investment.

Tip

The initial investment includes money spent and employee time.

Things You'll Need

  • Calculator
  • Amount of investment
  • Amount of business generated from the investment
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About the Author

Kristie Lorette started writing professionally in 1996. She earned her Bachelor of Science degree in marketing and multinational business from Florida State University and a Master of Business Administration from Nova Southeastern University. Her work has appeared online at Bill Savings, Money Smart Life and Mortgage Loan.