ROI is the most universal business metric there is. Every campaign, hire, tool purchase, or strategic initiative can be evaluated with one question: did the return exceed the investment?
Simple in theory. In practice, most teams calculate ROI wrong by either missing costs or miscounting returns.
The ROI formula
ROI (%) = (Revenue - Investment) / Investment × 100
Net profit = Revenue - Investment. ROI tells you what percentage of the original investment you earned back as profit. A 150% ROI on a ₹1L investment means ₹1.5L net profit on top of recovering the original ₹1L, for total returns of ₹2.5L.
Return per ₹1 invested tells you the same thing in a more intuitive way: how many rupees came back for every rupee you put in.
Annualised ROI: the number that actually matters for comparison
A 200% ROI sounds fantastic. But is that over 6 months or 3 years? Context changes everything.
Annualised ROI = ROI % / Months × 12
If you earned 200% ROI in 6 months, your annualised ROI is 400% per year. If that same 200% took 3 years, annualised is only 67% per year. Both are positive, but the comparison tells you which investment was more capital-efficient.
This is the number to use when comparing two different investments with different time horizons.
What counts as good ROI
Marketing ROI: industry benchmark is 5:1 (₹5 returned for every ₹1 spent, which is 400% ROI). Below 2:1 (100% ROI) means the channel is losing money once you factor in overhead.
Hiring ROI: harder to measure but important. A salesperson costing ₹12L/year who brings in ₹60L of new ARR has a 5x return. Worth it. A salesperson costing ₹18L who brings ₹20L ARR is breakeven at best.
Capital investment ROI: A ₹50L manufacturing upgrade that reduces per-unit cost by ₹200 and you sell 3,000 units/month has annual savings of ₹72L. ROI in under 9 months.
My colleague Priya spent ₹80,000 on a Google Ads campaign for her online course. Revenue from that campaign: ₹3.2L. That’s a 300% ROI in 45 days. Annualised, it’s over 2,400%. Not every campaign performs like that, but it’s the right way to evaluate whether to run it again.
Common ROI calculation mistakes
Including revenue instead of profit: if your product costs ₹400 to make and sells for ₹1,000, your return isn’t ₹1,000 – it’s ₹600. Use net revenue minus direct costs as your “return” for an accurate picture.
Ignoring time: comparing a 6-month ROI with an 18-month ROI without annualising is misleading. Always annualise when comparing options.
Forgetting indirect costs: a ₹2L marketing campaign that consumed 40 hours of team time has a hidden cost of ₹40,000+ in salary. Include it.
Use with the gross margin calculator to make sure the revenue side of your ROI calc reflects actual contribution, not just top-line revenue.
Shipping an AI feature? Price the model spend with the LLM cost calculator before it goes into the cost side of your ROI, because token bills can swing the return more than people expect.