What Is ROI: Calculating Return on Investment
ROI (Return on Investment) = (final value − initial investment) ÷ initial investment × 100%. Simply put, invest 1,000 and get back 1,200, and ROI is 20%.
Why ROI matters
- Compare which project is more worthwhile
- Evaluate whether ad spend breaks even
- Give bosses/clients an intuitive return number
Don't forget the time dimension
ROI doesn't show time. 20% in a year vs 20% in a day are worlds apart, so also look at annualized return.
💡 When comparing options, normalize periods to annualized returns first for a fair comparison.