Simple ROI Calculator

ROI stands for return on investment. It shows the gain or loss on an investment as a percentage of what it cost. A $1,000 purchase that becomes $1,200 has a 20% ROI, and one that becomes $800 has a -20% ROI. Because it's a percentage, it lets you compare investments of different sizes, which raw dollar profits can't do.

Follow three steps. Add up everything you spent, including fees. Subtract that from everything you got back to find your net gain. Divide the net gain by what you spent and multiply by 100. For example, spending $2,500 and getting back $3,100 gives a $600 gain, and $600 / $2,500 x 100 = 24%.

Put the cost in cell A1 and the final value in cell B1. In another cell, enter =(B1-A1)/A1 and format that cell as a percentage. To turn the result into a yearly rate when you held the investment for a number of years in C1, use =(B1/A1)^(1/C1)-1. Our spreadsheet view can also copy a period-by-period table or download it as CSV or Excel.

There is no single answer, because a good ROI depends on risk and time. A useful test is whether the return beats your next best option for similar risk. For a long-term stock portfolio, many planners assume around 7% a year. A risky small project should promise much more than that, because you could lose your money, and a guaranteed one can reasonably promise less.

A negative ROI means you lost money: the final value came in below your cost. If you put in $1,000 and ended with $850, your ROI is -15%. A negative number isn't always a mistake. Insurance usually has a negative ROI by design, and a paper loss isn't locked in until you sell. It does mean you have to gain more than you lost to recover. A 50% loss needs a 100% gain to break even.

Annualized ROI converts a total return into an equivalent yearly rate, so you can compare investments held for different lengths of time. The formula is (final value / cost) ^ (1 / years) - 1. Doubling your money in 5 years is a 100% ROI, or about 14.9% a year. Doubling it in 10 years is the same 100% ROI, but only about 7.2% a year.

ROI gives you a common yardstick. It helps you decide whether a project is worth doing, choose between two options and check afterward whether a decision paid off. Writing the calculation down also forces you to list your real costs and to admit what you're assuming about the payoff, and that is often where the most useful insight comes from.

It can, and for business assets it often should. If you buy a $10,000 machine that wears out in five years, $2,000 of its cost could be counted each year when you measure yearly returns. Over the machine's full life, you're already counting its whole cost, so adding depreciation would count it twice. Pick one method and use it for every project you compare.

People often use them interchangeably, but ROI usually means the total gain over the entire period, while rate of return usually means a yearly figure. A 40% ROI over four years is about a 8.8% annual rate of return. When someone quotes a return, check whether it's total or per year, because the two can look very different.

List all the costs: labor, software, equipment, contractors and overhead. Estimate the benefits in dollars: extra revenue, money saved or hours freed multiplied by what those hours cost. Then apply the ROI formula. Because future benefits are estimates, try a cautious case and an optimistic case. For multi-year projects, the NPV calculator also accounts for the time value of money.

ROI ignores time, risk and anything you can't put a dollar figure on. It can also be gamed by leaving costs out. Two projects with the same 30% ROI may differ wildly in how long they take and how likely they are to work. Use it alongside a yearly rate, a realistic look at risk and, for longer projects, net present value.