ROI (Return on Investment) is a performance metric that measures the efficiency of an investment. It is expressed as a percentage of net profit relative to the cost of the investment.

A good ROI depends on context. For stock market investments, 7–10% annually is considered solid (S&P 500 historical average). For marketing, a 5:1 revenue-to-spend ratio (400% ROI) is considered strong. Real estate typically targets 8–12% annually.

What is the ROI formula?

ROI = ((Net Return − Cost of Investment) ÷ Cost of Investment) × 100. For example, investing $1,000 and receiving $1,300 back gives ROI = ((1300 − 1000) ÷ 1000) × 100 = 30%.

What is annualized ROI?

Annualized ROI normalizes returns across different time periods so investments can be fairly compared. Formula: Annualized ROI = ((Final Value ÷ Initial Value)^(1 ÷ Years)) − 1.

What is the difference between ROI and profit margin?

ROI measures return relative to investment cost. Profit margin measures profit relative to revenue. ROI is used to evaluate investment decisions; profit margin evaluates operational efficiency.

How is marketing ROI different from investment ROI?

Marketing ROI factors in gross margin because not all revenue is profit. A campaign generating $10,000 revenue with $2,000 spend looks like 400% ROI, but if gross margin is 50%, true marketing ROI is 150%.

Free ROI Calculator Online

Calculate return on investment three ways — basic ROI, annualized ROI versus a benchmark, and marketing ROI adjusted for gross margin — with net gain, payback period, and substituted formulas.

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What counts as good ROI?

General investments: > 7% annually (S&P 500 historical average)
Marketing campaigns: > 100% (5:1 revenue-to-cost ratio)
Real estate: 8–12% annually

Frequently Asked Questions

What is ROI?: ROI (Return on Investment) is a performance metric that measures the efficiency of an investment. It is expressed as a percentage of net profit relative to the cost of the investment.
What is a good ROI?: A good ROI depends on context. For stock market investments, 7–10% annually is considered solid (S&P 500 historical average). For marketing, a 5:1 revenue-to-spend ratio (400% ROI) is considered strong. Real estate typically targets 8–12% annually.
What is the ROI formula?: ROI = ((Net Return − Cost of Investment) ÷ Cost of Investment) × 100. For example, investing $1,000 and receiving $1,300 back gives ROI = ((1300 − 1000) ÷ 1000) × 100 = 30%.
What is annualized ROI?: Annualized ROI normalizes returns across different time periods so investments can be fairly compared. Formula: Annualized ROI = ((Final Value ÷ Initial Value)^(1 ÷ Years)) − 1.
What is the difference between ROI and profit margin?: ROI measures return relative to investment cost. Profit margin measures profit relative to revenue. ROI is used to evaluate investment decisions; profit margin evaluates operational efficiency.
How is marketing ROI different from investment ROI?: Marketing ROI factors in gross margin because not all revenue is profit. A campaign generating $10,000 revenue with $2,000 spend looks like 400% ROI, but if gross margin is 50%, true marketing ROI is 150%.