How to Calculate ROI (Return on Investment) with Examples

To calculate ROI (return on investment), subtract what you invested from what you got back, then divide by what you invested: ROI (%) = (amount returned − amount invested) ÷ amount invested × 100. If you spend $1,000 and get $1,250 back, your net profit is $250 and your ROI is 25%. The free ROI Calculator gives you both numbers from two inputs.

The ROI formula

Net profit = Amount returned − Amount invested
ROI (%)    = Net profit ÷ Amount invested × 100

Amount invested is everything you put in: purchase price, fees, setup costs, and ad spend. Amount returned is the total value you got back. That's the sale price of an asset, or the extra profit an initiative produced. It isn't just the gain.

ROI is a ratio, so it lets you compare a $200 experiment with a $20,000 purchase on the same scale. What it doesn't capture is how long the money was tied up. That's covered in the annualized section below.

How to use the ROI Calculator

1. Enter your total cost in Amount invested. It must be greater than zero.
2. Enter the total value you got back in Amount returned.
3. Click Calculate ROI.

The Return on investment panel shows ROI as a percentage and Net profit in dollars. If you enter zero or a negative number for the investment, the tool asks for a positive amount instead. Reset brings back the defaults ($1,000 invested, $1,500 returned).

Worked examples

Example 1: an ad campaign

You spend $1,000 on ads, and the orders they bring in produce $1,250 of profit after product costs.

• Net profit = $1,250 − $1,000 = $250
• ROI = $250 ÷ $1,000 × 100 = 25%

Example 2: equipment that pays for itself

A freelancer buys a $2,400 camera kit and earns $3,000 from shoots they couldn't have taken without it.

• Net profit = $3,000 − $2,400 = $600
• ROI = $600 ÷ $2,400 × 100 = 25%

Example 3: a loss

You put $1,500 into a trade-show booth and trace $1,200 of profit back to it.

• Net profit = $1,200 − $1,500 = −$300
• ROI = −$300 ÷ $1,500 × 100 = −20%

Example 4: revenue vs profit as the "return"

Same $1,000 ad spend, but this time you look at sales instead of profit. The campaign brought in $3,000 in sales, and the products cost $1,500 to make and ship.

• Using sales as the return: ($3,000 − $1,000) ÷ $1,000 = 200%, which overstates the result
• Using profit from the sales ($3,000 − $1,500 = $1,500) as the return: ($1,500 − $1,000) ÷ $1,000 = 50%

If what you're measuring has its own costs, subtract them before you enter Amount returned. The profit margin guide shows how to work out that profit figure.

ROI reference table

Here's the ROI on a $1,000 investment at different return amounts:

An ROI of 100% means you doubled your money. An ROI of −100% means you lost all of it.

Annualized ROI: accounting for time

Simple ROI ignores time. A 30% return in one year is far better than a 30% return over three years, but the calculator shows 30% for both. To compare investments that ran for different lengths of time, convert each one to an annual rate:

Annualized ROI = (1 + ROI)^(1 ÷ years) − 1

For example, $5,000 that grows to $6,500 over 3 years has a simple ROI of 30%:

• (1 + 0.30)^(1 ÷ 3) − 1 = 1.0914 − 1 ≈ 9.14% per year

A 50% ROI over 5 years works out to about 8.45% per year. Use this formula when your holding periods differ. You don't need it for things that pay back within a year.

Common mistakes

Ignoring time. As shown above, simple ROI can make a slow investment look as good as a fast one. Annualize before you compare.

Leaving costs out of "invested." Fees, shipping, software subscriptions, and your own hours all count. If a project took 40 hours you'd otherwise bill, that's part of the real investment, even if no money changed hands.

Using revenue instead of profit as the return. See Example 4. Sales aren't a return if most of the money goes straight back out as product cost.

Treating ROI as a guarantee. Past ROI describes what happened, not what will happen next time. This guide is an explanation of the math, not financial advice.

Spreadsheet formulas

In Excel or Google Sheets, with amount invested in B2, amount returned in C2, and years in D2:

Net profit:      =C2-B2
ROI:             =(C2-B2)/B2
Annualized ROI:  =(C2/B2)^(1/D2)-1

Format the ROI cells as percentages. C2/B2 is the same as 1 + ROI, so the annualized formula stays short.

Privacy

The ROI Calculator runs in your browser. The amounts you enter aren't sent to a server or saved, and closing the tab clears them.

Related tools

ROI tells you whether spending paid off. To check whether a single sale was profitable, use the Profit Margin Calculator. To set prices from cost, use the Markup Calculator. If you're working out whether a promotion was worth it, the discount guide shows how sale prices eat into profit. All of these are collected in the free business tools guide for freelancers.