Understand what ROI is, how to calculate it and the importance of this metric
Posted: Sun Jan 19, 2025 10:20 am
Marketing, Information Technology (IT), Research and Development (R&D). No matter the area: investing is always a big step for a company to achieve its long-term goals .
It turns out that, as important as investing is monitoring the return on investment (ROI). Do you know what ROI is and how to calculate this metric?
In this post, we will explain a little more about the subject, showing its importance and teaching how to calculate this indicator. Follow along with us.
After all, what is ROI?
ROI is a metric used to monitor the return on any type of investment made by a company. In other words, any investment that aims to generate a financial return in the short, medium or long term can be measured with this metric.
Although the main purpose of ROI is to job seekers database return on investment, the fact is that it can mean much more than that. It is with this metric that we can discover whether a given strategy adopted by the company is on the right track, or whether we should change course.
How to calculate ROI?
Calculating ROI is very simple, just follow the formula:
ROI = (Profit from Investment – Cost of Investment) / Cost of Investment x 100
Although it may seem easy, you need to take some precautions to find the exact result. Remember that profit is not revenue. You need to make all the deductions until you reach it. In addition, the cost must include everything that was invested, without excluding anything.
How about checking out a practical example?
Let's assume that a company has invested heavily in marketing . It has purchased promotional materials, hired specialized companies and even provided training. Adding everything up, without exclusions, we had a cost of R$10,000. After the investment, the company saw an increase of R$100,000 in its profit, after deductions.
In this case, we would have to:
ROI = (100,000 – 10,000) / 10,000 x 100
ROI = 9 x 100
ROI = 900%
In short, what happened is that the return was nine times greater than the investment, which is an excellent result for the organization.
How important is ROI?
Cut unnecessary expenses
With ROI, you can cut a series of unnecessary expenses. This is because, by using the metric, you can trim the costs of your strategy until you discover which ones are really relevant, and which ones do not contribute at all to increasing your return.
Increase profit
As a result, by reducing costs, we can increase profits. Monitoring ROI is also essential to find out more about the company's potential and, more importantly, what needs to be done to ensure even greater returns for the business.
It turns out that, as important as investing is monitoring the return on investment (ROI). Do you know what ROI is and how to calculate this metric?
In this post, we will explain a little more about the subject, showing its importance and teaching how to calculate this indicator. Follow along with us.
After all, what is ROI?
ROI is a metric used to monitor the return on any type of investment made by a company. In other words, any investment that aims to generate a financial return in the short, medium or long term can be measured with this metric.
Although the main purpose of ROI is to job seekers database return on investment, the fact is that it can mean much more than that. It is with this metric that we can discover whether a given strategy adopted by the company is on the right track, or whether we should change course.
How to calculate ROI?
Calculating ROI is very simple, just follow the formula:
ROI = (Profit from Investment – Cost of Investment) / Cost of Investment x 100
Although it may seem easy, you need to take some precautions to find the exact result. Remember that profit is not revenue. You need to make all the deductions until you reach it. In addition, the cost must include everything that was invested, without excluding anything.
How about checking out a practical example?
Let's assume that a company has invested heavily in marketing . It has purchased promotional materials, hired specialized companies and even provided training. Adding everything up, without exclusions, we had a cost of R$10,000. After the investment, the company saw an increase of R$100,000 in its profit, after deductions.
In this case, we would have to:
ROI = (100,000 – 10,000) / 10,000 x 100
ROI = 9 x 100
ROI = 900%
In short, what happened is that the return was nine times greater than the investment, which is an excellent result for the organization.
How important is ROI?
Cut unnecessary expenses
With ROI, you can cut a series of unnecessary expenses. This is because, by using the metric, you can trim the costs of your strategy until you discover which ones are really relevant, and which ones do not contribute at all to increasing your return.
Increase profit
As a result, by reducing costs, we can increase profits. Monitoring ROI is also essential to find out more about the company's potential and, more importantly, what needs to be done to ensure even greater returns for the business.