ROI Calculator
Work out your return on investment, annualized growth, and profitability rating in seconds.
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What Is ROI?
Return on Investment, or ROI, is a simple way to measure how much profit (or loss) an investment generates relative to what it cost. It strips away the noise and answers one practical question: for every unit of currency put in, how much came back out? Because the formula is unitless, ROI lets you compare wildly different investments side by side, from a marketing campaign to a piece of equipment to a stock purchase, using the same yardstick.
How to Calculate ROI
Calculating ROI takes three steps. First, add up everything you spent, including the initial outlay and any additional costs such as fees, maintenance, or overhead, to get your total investment. Second, subtract that total investment from the total return to find your net profit. Third, divide the net profit by the total investment and multiply by 100 to express the result as a percentage. If you want to compare investments held for different lengths of time, annualizing the ROI converts the result into a consistent yearly rate.
ROI Formula
Total Investment = Initial Investment + Additional Costs
Net Profit = Total Return − Total Investment
ROI (%) = (Net Profit ÷ Total Investment) × 100
Annualized ROI (%) = ((Total Return ÷ Total Investment)^(1 ÷ Years) − 1) × 100
Example Calculation
Suppose you invest 100,000 in a project, spend an additional 10,000 on setup costs, and the project returns 150,000 after two years. Your total investment is 110,000. Net profit is 150,000 minus 110,000, which equals 40,000. ROI is 40,000 divided by 110,000, multiplied by 100, which comes out to roughly 36.4%. Annualizing that over two years brings the figure down to about 16.8% per year, since the basic ROI percentage does not account for how long your money was tied up.
Why ROI Matters
ROI matters because it turns raw profit numbers into a comparable rate of efficiency. A project that returns 50,000 sounds better than one that returns 20,000, until you realize the first one required ten times the investment. ROI corrects for that by measuring return relative to cost, which makes it far easier to rank opportunities, justify budgets, and decide where additional capital is best spent. Annualized ROI adds another layer of fairness by accounting for time, so a quick two-year win and a slow ten-year win can be judged on equal footing. If you’re running paid ad campaigns, it also helps to look at the cost side on its own. Our CPC Calculator breaks down exactly what you’re paying per click, which pairs well with the ROI figures above when you’re judging a campaign’s overall return.
Frequently Asked Questions
What is a good ROI percentage?
It depends on the type of investment and how long your money is tied up. As a general guide, anything above 50% is considered excellent, 20%–50% is good, 10%–20% is average, 0%–10% is poor, and anything below 0% means you lost money. Context matters too: a 15% ROI on a one-year project is far better than a 15% ROI spread over ten years.
What is the difference between ROI and annualized ROI?
ROI measures total return over the entire life of the investment regardless of how long it took. Annualized ROI converts that figure into an average yearly rate, which makes it possible to fairly compare a one-year investment against a five-year investment.
Should I include additional costs in my ROI calculation?
Yes. Leaving out costs like fees, maintenance, shipping, or labor inflates your ROI and gives a misleadingly optimistic picture. Including every cost tied to the investment in the total investment figure gives a far more accurate result.
Can ROI be negative?
Yes. A negative ROI simply means the total return was lower than the total investment, so the investment lost money rather than made it.
Does ROI account for risk?
No. ROI only measures profitability relative to cost; it does not factor in the level of risk taken to achieve that return. Two investments with identical ROI can carry very different risk profiles, so ROI is best used alongside other risk metrics, not in isolation.
How is ROI different from profit margin?
Profit margin measures profit as a percentage of revenue or sales, while ROI measures profit as a percentage of the amount invested. They answer different questions: profit margin shows how efficiently a sale converts to profit, while ROI shows how efficiently invested capital converts to profit.
What counts as the “initial investment”?
The initial investment is the upfront amount of capital committed to the opportunity before any returns come in, such as the purchase price of an asset, the budget allocated to a campaign, or the capital injected into a business.
Why does my annualized ROI look lower than my total ROI?
Total ROI reflects the entire return over the whole period, while annualized ROI spreads that same return evenly across each year. If your investment ran for more than one year, the yearly rate will naturally be lower than the cumulative total, even though the underlying profit is identical.