Free tool
ROI calculator: return on investment and marketing ROI
Convertica's free ROI calculator works out return on investment from two numbers: what you put in and what you got back. Add how long it took and it gives the annualized ROI as well. Below it are a marketing ROI calculator that works on gross profit, and a calculator for what a conversion rate lift is worth on your own traffic. All three work in any currency.
Short answer
An ROI calculator divides the net return on an investment by what it cost: ROI = (amount returned - amount invested) / amount invested × 100. For example, 10,000 invested and 14,000 returned is an ROI of 40%. Held for 3 years, that is an annualized ROI of 11.87%. Marketing ROI uses the same formula on gross profit.
- ROI has no time in it. Annualized ROI puts it back, so returns over different periods can be compared.
- Annualized ROI is a compound rate, so it is lower than total ROI divided by the number of years.
- Marketing ROI belongs on gross profit. The simple formula on revenue counts the cost of what you sold as profit.
- The value of a conversion lift is arithmetic on your own traffic and order value. The lift itself has to be measured in an A/B test.
- There is no universal good ROI: compare the annualized figure with what the same money would earn elsewhere at similar risk.
ROI calculator
Free to use, no sign-up. Any currency, as long as both amounts use the same one. The result updates as you type.
Return on investment (ROI)
40.00%
Net return: 14,000 returned - 10,000 invested = 4,000.
ROI: 4,000 ÷ 10,000 invested × 100 = 40.00%. Each 1 invested came back as 1.40.
Annualized ROI: (14,000 ÷ 10,000)^(1 ÷ 3) - 1 = 11.87% a year. That steady yearly rate compounds to the same 40.00% over the period.
Dividing 40.00% by 3 gives 13.33% a year, which is too high: it ignores compounding.
Formula
net return = amount returned - amount invested
ROI = net return / amount invested * 100
annualized ROI = (amount returned / amount invested)^(1 / years) - 1Marketing ROI calculator
ROI on gross profit: what a campaign returned after paying for the goods it sold and for itself.
Marketing ROI (on gross profit)
68.00%
Gross profit: 21,000 revenue × 40% gross margin = 8,400.
ROI: (8,400 - 5,000 spend) ÷ 5,000 × 100 = 68.00%. After paying for the marketing, 3,400 of gross profit is left.
ROAS on the same numbers: 21,000 ÷ 5,000 = 4.20. ROAS counts revenue; this ROI counts the gross profit left after the spend.
The simple formula on revenue, (21,000 - 5,000) ÷ 5,000, gives 320.00%. It treats all revenue as profit, so it overstates the return at any margin below 100%.
Formula
gross profit = revenue * gross margin
marketing ROI = (gross profit - marketing spend) / marketing spend * 100What a conversion lift is worth
Your traffic, your conversion rate, your order value. The lift is your input too: this calculator values a lift, it does not predict one.
Extra revenue a month from a 10% lift
7,500
Conversion rate: a 10% relative lift takes 2.5% to 2.75% (2.5% × 1.10).
Conversions: 50,000 visitors × 2.5% = 1,250 a month now and 1,375 with the lift. That is 125 more a month, 1,500 more a year.
Extra revenue: 125 × 60 per conversion = 7,500 a month, 90,000 a year.
Extra gross profit: 7,500 × 40% gross margin = 3,000 a month, 36,000 a year.
This is arithmetic on your own inputs, not a forecast. The lift is the number you chose, and the yearly figures assume that it, your traffic and your order value hold for 12 months.
Formula
extra conversions = monthly visitors * conversion rate * relative lift
extra revenue = extra conversions * value per conversion
extra gross profit = extra revenue * gross margin
ROI over 12 months = (12 * monthly gain - cost) / cost * 100
payback in months = cost / monthly gain
break-even lift = cost / (12 * what conversions bring in a month now)What is the ROI formula?
The ROI formula is net return divided by the amount invested, times 100. Return on investment tells you how much an investment gained or lost as a percentage of what it cost. With 10,000 invested and 14,000 returned, the net return is 4,000 and ROI is 4,000 / 10,000 × 100 = 40%.
ROI = (amount returned - amount invested) / amount invested * 100You will also see it written as net profit divided by the cost of the investment. It is the same sum. What changes the answer is what you count: every cost belongs in the amount invested, fees and taxes included, and everything that came back belongs in the amount returned, income along the way as well as the final value.
How to use the ROI calculator
- Enter the amount invested. The full cost, not just the purchase price.
- Enter the amount returned. Sale proceeds or current value, plus anything the investment paid out. If you only know the profit, set "Calculate from" to "Invested and gain or loss".
- Add the time held if you want annualized ROI. In years, months or days.
- Read the result. Net return, ROI and annualized ROI, each with its arithmetic, so you can check it by hand.
How to calculate ROI: a worked example
To calculate ROI, subtract the amount invested from the amount returned, divide the difference by the amount invested and multiply by 100. To compare the result with another investment, annualize it. The numbers below are the default values in the calculator, made up to show the arithmetic; they are not a benchmark.
- Amount invested: 10,000. Amount returned: 14,000. Time held: 3 years.
- Net return = 14,000 - 10,000 = 4,000.
- ROI = 4,000 / 10,000 × 100 = 40%.
- Growth factor = 14,000 / 10,000 = 1.40.
- Annualized ROI = 1.40^(1 / 3) - 1 = 11.87% a year.
- Check: 10,000 growing by 11.87% a year for 3 years comes back to 14,000, allowing for rounding.
A loss works the same way
25,000 invested and 20,000 returned after 18 months is a net return of -5,000 and an ROI of -20%. 18 months is 1.5 years, so the annualized ROI is (20,000 / 25,000)^(1 / 1.5) - 1 = -13.82% a year.
What is annualized ROI?
Annualized ROI is the steady yearly rate that would turn the amount invested into the amount returned over the time the investment was held. It is the same calculation as compound annual growth rate (CAGR). Plain ROI has no time in it, so annualized ROI is the figure to use when you compare investments held for different lengths of time.
annualized ROI = (amount returned / amount invested)^(1 / years) - 1The same 40% total ROI is a very different result depending on how long it took:
| Time held | Annualized ROI | Total ROI divided by years |
|---|---|---|
| 1 year | 40% | 40% |
| 2 years | 18.32% | 20% |
| 3 years (the example) | 11.87% | 13.33% |
| 5 years | 6.96% | 8% |
| 10 years | 3.42% | 4% |
The last column is the mistake to avoid. Dividing total ROI by the number of years ignores compounding: each year's gain earns its own return in the years after it, so the yearly rate that really gets you to 40% is lower than the simple average.
The limits of the annualized ROI formula
- One amount in, one amount out. The formula assumes a single sum at the start and a single value at the end. If money went in or came out along the way, such as monthly contributions, rent or dividends taken as cash, use an internal rate of return instead.
- A smooth rate that never happened. It reports one steady yearly rate. The real path may have been up one year and down the next.
- Short periods exaggerate. Annualizing a gain made in days or weeks assumes the same result repeats, and is reinvested, for the rest of the year. A 5% gain in 90 days annualizes to 21.88%.
- Calendar conventions differ. This calculator counts a month as one twelfth of a year and a day as 1/365 of a year. A tool that works from exact calendar dates can give a slightly different figure.
How do you calculate marketing ROI?
To calculate marketing ROI, multiply the revenue attributed to the marketing by your gross margin to get gross profit, subtract what the marketing cost, and divide by that cost. Marketing ROI on gross profit shows whether a campaign made money after paying for what it sold, which the simple revenue formula cannot show.
marketing ROI = (revenue * gross margin - marketing spend) / marketing spend * 100- Marketing spend: 5,000. Revenue attributed to it: 21,000. Gross margin: 40%.
- Gross profit = 21,000 × 0.40 = 8,400.
- Marketing ROI = (8,400 - 5,000) / 5,000 × 100 = 68%.
You will often see marketing ROI written as (revenue - cost) / cost. Here that gives (21,000 - 5,000) / 5,000 × 100 = 320%, which is only right when the revenue is all profit. The gap between 320% and 68% is the cost of the goods sold. The same campaign at different margins:
| Gross margin | Gross profit | Left after the spend | Marketing ROI |
|---|---|---|---|
| 20% | 4,200 | -800 | -16% |
| 40% (the example) | 8,400 | 3,400 | 68% |
| 60% | 12,600 | 7,600 | 152% |
| 80% | 16,800 | 11,800 | 236% |
| 100% | 21,000 | 16,000 | 320% |
Marketing ROI vs ROAS
ROAS is revenue divided by ad spend: 21,000 / 5,000 = 4.20 in the example. It counts revenue, not profit, and usually only the media cost. Marketing ROI counts gross profit and every cost of the campaign. The simple revenue formula is ROAS minus 1, shown as a percentage. For break-even and target ROAS from your margin, see the ROAS meaning and ROAS calculator.
What goes into the numbers
- Spend. Media, agency or freelancer fees, tools, creative, and any discount the campaign funded. Say which you included.
- Revenue. Only what the marketing caused. An ad platform also credits itself with sales that would have happened anyway, such as branded searches and returning customers. Links tagged with the UTM generator let your own analytics count revenue by campaign.
- Gross margin. Revenue minus the cost of the goods, shipping and payment fees, as a share of revenue. The margin calculator works it out from price and cost.
- Timing. With a long sales cycle or repeat purchases, revenue arrives after the spend. Wait for it, or use a measured customer value from the LTV calculator.
When a conversion has no revenue attached yet, as with leads and sign-ups, use cost per acquisition instead: see the CPA formula and calculator. At a fixed spend, marketing ROI rises with three things: a lower cost per click (CPC calculator), a higher conversion rate and a higher order value.
How do you calculate the ROI of conversion rate optimization?
To calculate the ROI of conversion rate optimization, work out what your conversions bring in each month now, multiply by the relative lift to get the extra, and compare 12 months of that extra gross profit with what the work cost. Every input is your own, and only the lift cannot be looked up: it has to be measured.
- Monthly visitors: 50,000. Conversion rate: 2.5%. Average order value: 60. Gross margin: 40%.
- Conversions now = 50,000 × 2.5% = 1,250 a month. Gross profit from them = 1,250 × 60 × 0.40 = 30,000 a month.
- Choose a lift to value. At a 10% relative lift (an illustration, not a prediction), the conversion rate goes from 2.5% to 2.75%: 125 more conversions a month.
- Extra revenue = 125 × 60 = 7,500 a month. Extra gross profit = 7,500 × 0.40 = 3,000 a month, or 36,000 a year.
- If the work cost 24,000 (also an illustration, not a price): ROI over the first 12 months = (36,000 - 24,000) / 24,000 × 100 = 50%, and payback = 24,000 / 3,000 = 8.0 months.
- Break-even lift = 24,000 / (12 × 30,000) = 6.67%. Below that, the work costs more than it returns in its first year.
A relative lift is a percentage of your current rate, not percentage points: 10% on 2.5% is 2.75%. To find your current rate, use the conversion rate calculator.
The lift a piece of work has to earn
The break-even lift turns the question around: it is the smallest lift that pays a given cost back within 12 months. It depends on what your conversions already bring in, so the same cost needs a far larger lift on a small site than on a large one.
| Monthly visitors | Conversions a month now | Gross profit from them a month | Break-even lift |
|---|---|---|---|
| 5,000 | 125 | 3,000 | 66.67% |
| 20,000 | 500 | 12,000 | 16.67% |
| 50,000 (the example) | 1,250 | 30,000 | 6.67% |
| 200,000 | 5,000 | 120,000 | 1.67% |
A small break-even lift is cheap to clear but takes a lot of traffic to confirm in a test. A large one shows up in a test quickly but asks more of the change itself.
A lift is measured, not assumed
This calculator will value any lift you type in. It cannot tell you which lift you will get, and nobody can before a test. A lift is established by an A/B test: the A/B test sample size calculator shows how many visitors each variant needs to detect a lift of a given size, and the statistical significance calculator checks whether a finished test's difference is more than chance.
For results that were measured, not chosen, Convertica's CRO case studies each name the metric, the test and how long it ran. In the dScryb case study, a 17-day A/B test at a 98% confidence level measured a 49.4% increase in paid membership sign-ups and a 23.8% increase in revenue per visitor. That is one test on one site, not a figure to enter for yours.
More conversions from the same visitors and more visitors are the two ways to raise the return on a marketing budget: the guide to SEO vs CRO covers which to put first. To see what is holding your own page back, Convertica's free CRO audit scores it on eight checks and returns three fixes.
ROI vs ROAS, ROE, IRR and payback period
ROI, ROAS, ROE, IRR and payback period all measure return, but each answers a different question. ROI compares a gain with its cost. ROAS compares revenue with ad spend. ROE compares a company's profit with its owners' equity. IRR is a yearly rate that respects the timing of cash flows. Payback period is the time needed to recover the cost.
| Measure | Formula | Use it for |
|---|---|---|
| ROI (return on investment) | (Amount returned - amount invested) / amount invested | One project, purchase or campaign with a clear cost and a clear return |
| Annualized ROI (CAGR) | (Amount returned / amount invested)^(1 / years) - 1 | Comparing investments held for different lengths of time |
| ROAS (return on ad spend) | Revenue from ads / ad spend | Judging ad campaigns day to day; it needs your margin before it says anything about profit |
| ROE (return on equity) | Net income / shareholders' equity | How well a whole company uses its owners' capital, not a single project |
| IRR (internal rate of return) | The yearly rate at which the present value of all cash flows, in and out, adds up to zero | Investments where money goes in or comes out at several different times |
| NPV (net present value) | Future cash flows discounted to today at a rate you choose, minus the cost | Putting an amount, not a percentage, on what a project adds |
| Payback period | Cost / gain per month or year | How long your money is at risk; it ignores everything after the cost is repaid |
What is a good ROI?
A good ROI is one that beats what the same money would have earned in its next best use, at similar risk, over the same time. There is no universal good ROI, because investments differ in length, in risk and in what they are being compared with. Annualize the figure first, then set it against your own alternatives.
That is why this page publishes no average ROI by asset or industry: a figure averaged over other people's investments, time periods and definitions of cost cannot tell you whether yours was worth making. These questions can:
- Over how long? A 20% ROI in one year is a 20% annual return. A 20% ROI over ten years is 1.84% a year.
- Compared with what? A savings rate, the interest on a loan you could repay, or the other project competing for the same budget.
- At what risk? A return you were certain of and a return you hoped for are not the same result, even at the same percentage.
- After which costs? Fees, taxes, your time and inflation all come out of the headline figure.
For marketing, the first line is 0% on gross profit: above it, the campaign paid for what it sold and for itself. After that, compare your own channels and campaigns, measured the same way.
How to calculate ROI in Excel or Google Sheets
To calculate ROI in Excel or Google Sheets, put the amount invested in one cell and the amount returned in another, subtract the first from the second, divide by the amount invested and format the result as a percentage. Annualized ROI needs one more cell for the number of years. The same formulas work in both.
| To get | Cells | Formula |
|---|---|---|
| ROI | A2 amount invested, B2 amount returned | =(B2-A2)/A2 |
| ROI, with empty rows left blank | As above | =IF(A2=0,"",(B2-A2)/A2) |
| Annualized ROI | C2 years held | =(B2/A2)^(1/C2)-1 |
| Annualized ROI, built-in function | As above | =RRI(C2,A2,B2) |
| Annualized ROI from two dates | C2 start date, D2 end date | =(B2/A2)^(365/(D2-C2))-1 |
| Marketing ROI | A2 spend, B2 revenue, C2 gross margin as a percentage | =(B2*C2-A2)/A2 |
When money went in or came out more than once, list each cash flow in one column, with money paid out as a negative number, and its date in the next. =XIRR(amounts, dates) then returns the yearly rate that accounts for the timing of each one.
What are the limits of ROI?
ROI is easy to calculate and easy to misread. It leaves out time, risk and the timing of cash flows, and it changes with whatever each person decides to count as cost and as return. Treat an ROI figure as a starting point, and ask how it was calculated before you compare it with another.
- No time. The same ROI can take a month or a decade. Annualize before you compare.
- No risk. ROI reports what happened, or what is forecast, not how likely it was.
- Loose definitions. One person counts taxes, fees and upkeep in the cost and another counts only the purchase price. Their ROIs for the same investment will not match.
- Attribution. For marketing, the return is only as good as the evidence that the spend caused it.
- Forecasts. An ROI built on an assumed lift, price or sales figure is a scenario until it has been measured.
Related calculators
ROI is the last line of the sum. These calculators cover the numbers that feed it.
See all free tools and how they fit together.
ROI calculator FAQ
What does an ROI calculator do?
An ROI calculator divides the net return on an investment by what it cost and shows the result as a percentage. Enter the amount invested and the amount returned, and this one gives the net return and the ROI. Add a time period and it also gives the annualized ROI, the figure to use when you compare investments held for different lengths of time.
What is the ROI formula?
The ROI formula is (amount returned - amount invested) / amount invested × 100. For example, 10,000 invested and 14,000 returned is a net return of 4,000, and 4,000 / 10,000 × 100 = 40%. It is also written as net profit divided by the cost of the investment.
How do you calculate ROI?
Subtract the amount invested from the amount returned to get the net return, divide the net return by the amount invested, and multiply by 100. Count every cost in the amount invested, including fees and taxes, and everything the investment paid out in the amount returned, or the percentage will be too high.
What is annualized ROI?
Annualized ROI is the steady yearly rate that would compound to the same total return over the time the investment was held: (amount returned / amount invested)^(1 / years) - 1. A 40% ROI over 3 years is 11.87% a year, not 13.33%, because each year's gain earns a return in the years after it.
What does a 20% ROI mean?
A 20% ROI means the investment returned its cost plus a fifth: 1.20 back for every 1 put in. It says nothing about how long that took. A 20% ROI in one year is a 20% annual return, while a 20% ROI over ten years is 1.84% a year, annualized.
What is a good ROI?
A good ROI is one that beats what the same money would have earned in its next best use, at similar risk, over the same time. There is no universal figure. Annualize the ROI first, then compare it with your real alternatives, such as a savings rate, paying down debt or another project.
How do you calculate marketing ROI?
Marketing ROI is (revenue attributed to the marketing × gross margin - marketing spend) / marketing spend × 100. With 5,000 spent, 21,000 in revenue and a 40% gross margin, gross profit is 8,400 and ROI is (8,400 - 5,000) / 5,000 = 68%. Leaving the margin out gives 320%, which counts revenue as if it were all profit.
What is the difference between ROI and ROAS?
ROAS is revenue divided by ad spend, a ratio that ignores what the goods cost to supply. ROI is profit divided by the whole investment. The same campaign can show a ROAS of 4.20 and an ROI of 68% at a 40% gross margin, or an ROI of -16% at a 20% margin.
What is the difference between ROI and ROE?
ROI compares the gain on one investment with what that investment cost. ROE, return on equity, is a company-level ratio: net income divided by shareholders' equity. Use ROI to judge a project, a purchase or a campaign, and ROE to judge how well a whole business uses its owners' capital.
How do I calculate ROI in Excel or Google Sheets?
Put the amount invested in A2 and the amount returned in B2, enter =(B2-A2)/A2 and format the cell as a percentage. For annualized ROI with the number of years in C2, use =(B2/A2)^(1/C2)-1. The RRI function gives the same figure: =RRI(C2,A2,B2).
How do I work out the ROI of conversion rate optimization?
Multiply monthly visitors by conversion rate and by the value of a conversion to get what conversions bring in now. A relative lift adds that share on top. Take 12 months of the extra gross profit, subtract the cost of the work and divide by the cost. The lift has to come from a measured A/B test, not from an assumption.