How it’s calculated
Gain minus cost, over cost.
- ROI = (Gain − Investment) ÷ Investment × 100
- Gain = Revenue × Gross margin (if a margin is entered)
- Net gain = Gain − Investment
ROI (return on investment) is the gain from an investment minus its cost, divided by the cost, written as a percentage. In marketing the honest ROI is computed on gross profit, not on revenue; enter your margin and the calculator does that.
A positive ROI means the investment covered its cost, a negative one that it did not: a 50% ROI is a net gain of 50 for every 100 spent.
ROI on revenue is optimistic because it ignores the cost of the product or service itself. Base decisions on ROI computed on gross profit.
Marketing pays back over time: today's investment can still bring repeat sales months later. For customer lifetime value see our LTV:CAC calculator.
Limits
- It assumes the revenue is correctly attributed to this investment; measurement and attribution errors change the ROI.
- Fixed costs (salaries, rent) are not in the gross margin; the business's net profit differs.
- ROIs over different periods cannot be compared directly; use the same period.
Frequently asked questions
What is the difference between ROI and ROAS?
Copy linkROAS divides revenue by ad spend; ROI divides the gain left after costs by the investment. ROAS shows the ads' efficiency, ROI the investment's profitability.
How do you calculate marketing ROI?
Copy linkMultiply the revenue attributed to marketing by the gross margin, subtract the total marketing cost and divide the result by that cost. The cost should include ad spend, agency fees and tools.
What does a negative ROI mean?
Copy linkThat the investment did not cover its cost in this period. With long sales cycles part of the return can arrive in later months, so choosing the right period matters.
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