How do I use the small business investment calculator?

The free app above is used to calculate any sort of ROI in small business. From a big hire to a marketing campaign to the acquisition of a competitor: the math is the same. 

You can make your calculation simpler or more complex using the Edit Formula button. This allows you to make hypothetical projections of business returns. Such math is not a part of the raw ROI formula but is still sure to be useful.

Remember that the results are shareable! Link straight to the ROI scenarios that you generate to anybody over email, text, or social media.

What is a small business return on investment (ROI)?

Return on investment (abbreviated as “ROI” from this point on) in small business describes what a business owner or investor gets in return after what they put in to fund a business or business decision. 

This is perhaps the most important math equation that you’ll ever use in a managerial or entrepreneurial role. ROI validates whether the time and effort of you and your employees is well-spent.

How do you calculate ROI for your small business?

There is only one true ROI equation and the formula technically doesn’t change when applied to small business ventures. Here’s a quick refresher:

\text{Small Business ROI} = {\text{Net Return}  \above{1pt} \text{Cost}} \times 100

In this equation, Net Return represents the Future Value minus the Initial Value of an investment.

\text{Net Return}  = \text{Future Value} - \text{Initial Value}

For example, the equity value of a merger or acquisition after broker commissions and other buyer-side expenses might represent your Initial Value.

An equity valuation of the business after a certain amount of time would represent the Future Value.

Small business valuations are frequently calculated by some type of multiple on earnings before taxes, interest, and depreciation of assets (abbreviated as EBITDA). Future Value is also impacted by how much income remains in on a business after startup expenses and any other assets on a balance sheet.

You can also think more granularly. It’s not just about starting or buying a business. You can apply the ROI formula to a major IT expenditure, to signing a new office lease, or the acquisition of a single customer.