ROI (Return on Investment)

ROI (Return on Investment) is a metric that reflects the profitability of investments. It helps understand how effectively a business uses its money: how much profit each invested ruble brings.

If the ROI is positive and exceeds 100%, it means the investments have not only been recouped but have also generated profit. If the figure is below 100%, the investments have proven unprofitable.

ROI Formula

The classic formula is as follows:
ROI = (Revenue – Costs) ÷ Costs × 100%

Example: A company invested 100,000 ₽ in advertising and generated 250,000 ₽ in revenue from it.
ROI = (250,000 – 100,000) ÷ 100,000 × 100% = 150%.
This means the investment was fully recouped and generated an additional 150% profit.

Calculation Example for Advertising Channels

A company launched advertising in three channels:

It’s clear that Google Ads and Facebook Ads perform well, while Yandex Direct yields less than 100% ROI, meaning the campaign there is unprofitable. Such analysis helps in budget reallocation.

Why a Business Needs ROI

ROI is a universal tool for evaluating investments. It is needed to:

• Compare the effectiveness of different channels and projects.
• Monitor the return on investment in advertising, marketing, production, and personnel.
• Make decisions about scaling and budget reallocation.
• Justify expenditures to investors and management.

For instance, if a company sees one channel delivering 250% ROI and another only 60%, it makes sense to increase investment in the former and reduce spending on the latter.

What is Considered a Good ROI?

This depends entirely on the business. In high-margin niches (IT, SaaS), an ROI of 50–100% may be sufficient. In retail and e-commerce, a figure above 200% is often targeted. For startups in the early stages, a negative ROI is normal, as expenses currently exceed revenues.

The key is to evaluate ROI not in isolation but in conjunction with other metrics: a high ROI with low sales volume is not always more profitable than a lower ROI with high turnover.

Difference Between ROI, ROAS, and ROMI

• ROI accounts for all business investments (advertising, production, salaries, logistics).
• ROAS (Return on Ad Spend) reflects only the revenue from advertising costs.
• ROMI (Return on Marketing Investment) shows the effectiveness of marketing as a whole: advertising, promotions, content.

Thus, ROI is the broadest metric, providing a complete understanding of profitability.

Common ROI Calculation Mistakes

• Not accounting for all expenses. Calculating only advertising costs can lead to an inflated ROI. Logistics, platform commissions, and salaries must be considered.
• Ignoring the sales cycle. In B2B or for expensive products, a customer may purchase months later, making short-term ROI underestimated.
• Incorrect attribution. A single customer might see ads across multiple channels, and misallocating revenue distorts the metric.
• Comparing incomparable projects. ROI for a one-month ad campaign and ROI for building a factory cannot be evaluated using the same criteria.

Calculation Tools

• Excel or Google Sheets — convenient for simple formulas.
• Online ROI calculators (e.g., Checkroi).
• Cross-channel analytics services (Roistat, Power BI, Google Analytics + CRM) that automatically pull revenue and cost data and calculate ROI for each channel.

Conclusion

ROI is a key business metric that shows how justified investments are and what profit they generate. It helps compare different projects, manage budgets, and make strategic decisions. However, ROI should be used alongside other metrics (ROAS, ROMI, LTV, CAC) to see the complete, real picture.