ROI Calculations: Making Data-Driven Business Decisions

Return on investment is the starting point—not the whole story. Combine ROI with payback and NPV for better decisions.

Basic ROI

ROI = (Gain - Cost) / Cost. If you spend $10,000 on a campaign and earn $13,000 in net profit, ROI = (13,000 - 10,000) / 10,000 = 0.3 or 30%.

Payback Period

How long until the project pays for itself? If monthly savings are $500 on a $6,000 investment, payback is 12 months. Shorter payback reduces risk.

NPV for Time Value

Net Present Value discounts future cash flows. A positive NPV suggests value creation at the chosen discount rate. Even with similar ROI, the project with the higher NPV (at an appropriate rate) is generally better.

Common Pitfalls

• Ignoring opportunity cost or resource constraints.
• Using revenue instead of profit in ROI.
• Not accounting for ongoing maintenance or churn.

Try It

Use our Percentage and Compound Interest calculators to test assumptions. For multi-year projects, model scenarios in a spreadsheet and compute NPV.