ROI, what it is and how to calculate it

ROI is a financial metric based on an economic investment and the money we have obtained for said investment in a particular case or situation.

By its acronym in English that means (Return on Investment) or in Spanish that would be Return on Investment.

In the structure of a current company, ROI is one of the most used KPIs, since it will give us the necessary information to evaluate the success of an investment, in order to establish whether the goals that have been proposed are achieved.

What is ROI (Return on Investment)?

The ROI is a value that measures the economic return that is obtained when making an investment.

This value allows us to know the money that was obtained when carrying out a business action, based on the initial budget, and thus to know how effective said action was and allowing us to know if it was worth it and was a waste of time, money and effort.

ROI Importance

• We can set more realistic goals and objectives. 
  
• We can identify the payback time for our initial investment. 
  
• We have real-time data on the investment. 
  

How ROI is calculated

ROI can be calculated with a fairly simple mathematical formula.

The formula for calculating ROI is as follows:

ROI= (Income - investment) / Investment. The result returned gives us a figure that indicates the return obtained by said investment that we usually convert to a percentage to analyze this return.

Example: Let's analyze a company that will invest $1000 in a digital marketing strategy, this marketing strategy results in $3000 of profit, so applying the formula: (3000 - 1000)/1000 = 2.

Once we go to percentage, that result gives us a 200% investment, resulting in a $2 return for every dollar invested in this marketing strategy.

Obtaining this data we can compare and analyze future or previous investments, and thus know which investments generate the most profits to better draw up your investment plan and know the path to obtain more secure profits.

There are multiple software in the payment market that can help you with ROI, choose the one you feel most comfortable with and start analyzing your data to improve the performance of your company, in the future you will know which investments are better and not waste your time, money and effort.