ROI Calculator
Calculate return on investment, net profit, and annualized return. Enter your initial cost and final value.
How to calculate ROI — step by step
- Identify the cost of your investment — total amount spent (purchase price, fees, additional costs).
- Identify the final value — what you got back (sale price, revenue generated, etc.).
- Calculate net profit: Final Value − Cost of Investment.
- Apply the ROI formula: ROI % = (Net Profit ÷ Cost) × 100.
- For multi-year comparisons, calculate annualized ROI.
Example 1 — stock investment
You buy shares for £4,000. After 3 years you sell for £6,200:
- Net Profit = £6,200 − £4,000 = £2,200
- Total ROI = (£2,200 ÷ £4,000) × 100 = 55%
- Annualized ROI = (1.55)1/3 − 1 = ~15.7% per year
Example 2 — marketing campaign
You spend £3,000 on a Google Ads campaign. It generates £11,000 in revenue:
- Net Profit = £11,000 − £3,000 = £8,000
- ROI = (£8,000 ÷ £3,000) × 100 = 267%
For every £1 spent, you got back £2.67 in profit.
Example 3 — equipment purchase
A bakery buys a new oven for £12,000. It generates an extra £5,000/year in profit. After 3 years it is worth £2,000:
- Total return = (£5,000 × 3) + £2,000 = £17,000
- Net Profit = £17,000 − £12,000 = £5,000
- ROI = (£5,000 ÷ £12,000) × 100 = 41.7% over 3 years
- Annualized ROI ≈ 12.3% per year
Frequently asked questions
What is a good ROI?
Depends on risk and alternatives. Low-risk investments (bonds, savings accounts) might justify 3–5%. Higher-risk business investments should target 15–30%+ annually. Marketing campaigns typically target 400%+ ROI (5:1 return).
Why use annualized ROI?
Total ROI is misleading without context. A 200% ROI over 20 years is much less impressive than the same return over 2 years. Annualizing lets you make fair comparisons.
What are the limitations of ROI?
ROI ignores risk, cash flow timing, and opportunity cost. A 20% ROI from a guaranteed source beats a 25% ROI from a risky venture for most investors. Use ROI alongside other metrics.