How to Calculate ROI

Calculating the return on investment (ROI) in business is one of the most important calculations that 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 $100,000 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 totaled $500,000. The equation to calculate ROI is:ROI = (return on investment - initial investment)/Investment * (100)

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• calculator, amount of investment, amount of business generated from the investment

How to Calculate ROI

1. The first bit of information that you need to have in order to calculate ROI is the return on investment. In this example, the return is $500,000.

2. Next, you need to know what the initial investment was. In this scenario, the ABC Company invested $100,000 in the marketing campaign.

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

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

Tips & Warnings

• The initial investment includes money spent and human time.