How to use the roi calculator
- 1Enter the total amount invested, including fees, setup and any running costs you paid along the way.
- 2Enter the amount returned: the total you got back, or what the investment is worth today.
- 3Optionally enter how many years the investment ran. Use decimals for part years.
- 4Read your ROI, net profit and, if you added a period, the annualized ROI. Change any number and the result updates instantly.
What ROI means
Return on investment is the profit an investment made as a share of what it cost. If you spend $10,000 on a new machine or an ad campaign and it brings back $15,000, the profit is $5,000 and the ROI is 50%.
A negative ROI means you lost money. An ROI of −100% means you lost everything you put in. There is no upper limit on the positive side.
ROI is only as good as the numbers you put in. Count every cost, such as installation, training, software and staff time, and count only the extra money the investment brought in, not sales you would have made anyway.
ROI % = (Amount returned − Amount invested) ÷ Amount invested × 100
Simple ROI vs annualized ROI
Simple ROI ignores time. A 50% return sounds better than a 30% return, but not if the 50% took three years and the 30% took one. Annualized ROI, also called the compound annual growth rate or CAGR, turns any return into the equivalent yearly rate so you can compare them fairly.
It assumes the gain compounded smoothly each year. That makes it the right figure for comparing an investment against a loan rate, a savings account or another project.
Annualized ROI % = ((Amount returned ÷ Amount invested)^(1 ÷ Years) − 1) × 100
The limits of ROI
This calculator uses one amount in and one amount out. It does not account for when money moved in between. If you invested in stages, or the investment paid you back gradually, such as monthly savings from new equipment, the timing changes the real return. For that, use internal rate of return (IRR) or net present value (NPV) in a spreadsheet.
ROI also ignores risk, inflation and tax. Two investments with the same ROI can carry very different chances of losing money, and the return you keep after tax depends on where you file and how the investment is held.
Worked example
A bakery spends $10,000 on a second oven. Over 3 years the extra baking capacity brings in $15,000 of profit before the oven cost. It compares this with a $10,000 shop refit that returned $13,000 in 1 year.
| Oven: amount invested | $10,000.00 |
| Oven: amount returned | $15,000.00 |
| Oven: net profit | $5,000.00 |
| Oven: ROI | 50% |
| Oven: annualized ROI over 3 years | 14.47% |
| Refit: ROI over 1 year | 30% |
| Refit: annualized ROI | 30% |
The oven has the higher simple ROI, 50% against 30%, but it took three times as long. Per year it returned 14.47% while the refit returned 30%, so the refit used the money more efficiently.