Free ROI Calculator
Return on Investment tells you how much value an investment created relative to what you put in. This calculator gives you both simple ROI and annualised ROI, so you can compare short and long-duration investments on the same footing.
Results
What the ROI Calculator does
ROI measures the net gain from a specific investment as a percentage of the amount originally invested, over a defined time period. Unlike the margin family, which measures profitability of ongoing sales, ROI measures the payback of a one-off or discrete spend — a marketing campaign, a piece of equipment, a project.
Methodology and formula
ROI % = ((Return − Investment) / Investment) x 100; Annualised ROI % = ((1 + ROI)^(1 / Years) − 1) x 100.
Worked example
- Inputs
- Initial investment 15,000; total return 21,000; holding period 2.5 years.
- Result
- Net profit 6,000; simple ROI 40%; annualised ROI about 14.9%.
A flat 40% return sounds strong until it's spread across two and a half years — annualising it to roughly 15% a year lets you compare it fairly against a one-year campaign that also returned 40%, which would be the far better investment.
When to use this tool
Use this tool to evaluate a single, discrete investment such as a campaign, asset purchase or project. Use the Customer Lifetime Value Calculator when the return is spread across an ongoing customer relationship, and the Net Profit Margin Calculator when you're assessing recurring operating profitability rather than a one-off spend.
About the ROI Calculator
The ROI formula
ROI = ((Return − Investment) / Investment) × 100. A $1,000 investment that returned $1,400 has a 40% ROI. Annualised ROI = ((1 + ROI)^(1/years) − 1) × 100, which normalises returns across different time periods.
Why annualised ROI matters
A 40% return over four years is not the same as a 40% return in one year. Annualised ROI expresses both as an equivalent yearly rate — the first is roughly 8.8%/year, the second is 40%/year — so you can compare fairly.
Limits of ROI
ROI ignores risk, cash-flow timing within the period and the cost of capital. Use it for quick comparisons, not final capital-allocation decisions.
Frequently asked questions
What counts as 'return'?
What's a good ROI?
Can ROI be negative?
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