ROI Calculator

ROI (Return on Investment) = ((Net Profit ÷ Cost of Investment) × 100). Net Profit = Final Value − Initial Investment. Example: you invest $10,000 and it grows to $13,500. Net Profit = $3,500. ROI = (3,500 ÷ 10,000) × 100 = 35%. ROI tells you the total return as a percentage of your initial investment, regardless of how long it took.

Annualized ROI (also called CAGR — Compound Annual Growth Rate) adjusts total ROI for the time period, allowing fair comparison between investments of different durations. Formula: Annualized ROI = ((1 + ROI/100)^(1/years) − 1) × 100. Example: 35% ROI over 3 years = 10.5% annualized ROI. A 35% ROI over 10 years = only 3.1% annualized — much less impressive.

It depends on the asset class and time period. Stock market (S&P 500 historical average): ~10% annualized (7% inflation-adjusted). Real estate: 8–12% annualized including appreciation and rental income. Business investments: 15–30%+ for small businesses. Marketing campaigns: 5:1 ratio ($5 return per $1 spent) is considered good. A higher ROI is always better, but must be weighed against risk.

ROI is simple: total return as a % of cost, ignoring time value of money. IRR (Internal Rate of Return) accounts for the timing of cash flows — a dollar received today is worth more than a dollar received in 5 years. For investments with multiple cash flows at different times (like rental properties or business projects), IRR is more accurate. For simple single-period investments, ROI and annualized ROI are sufficient.

Marketing ROI = ((Revenue from campaign − Cost of campaign) ÷ Cost of campaign) × 100. Example: $50,000 campaign generates $200,000 in revenue → ROI = (150,000 ÷ 50,000) × 100 = 300%. The industry benchmark for a good marketing ROI is 5:1 (500%) — meaning $5 in revenue for every $1 spent. A 10:1 ratio is excellent. Below 2:1 is typically unprofitable after indirect costs.

Payback period is how long it takes to recoup your initial investment from profits or cash flows. Formula: Payback Period = Initial Investment ÷ Annual Net Profit. Example: $10,000 investment generating $2,500/year profit → Payback = 4 years. Shorter payback periods reduce risk. In real estate, common payback periods are 10–20 years. In business, under 3 years is typically considered acceptable.