ROI Calculation Specialists

Finance/legal services

To calculate your ROI - Return On Investment - there are different calculation methods and approaches. ROI is the return that you make on a certain investment expressed in percentages. You can calculate the ROI for each investment you make. This can be investments in a company or a project, but also in for instance advertisements. Below are some examples of ROI calculations in different scenarios. If you want advice on how to calculate your ROI, you can contact an ROI specialist at TheONE. You can call someone who is online via live video calling and only pay for the minutes of the call.

Calculating ROI for an investment in a company

A company may need capital and if you are the person who invests, you usually want more capital in return than you have invested in it.

Scenario 1

You invest 10,000 in exchange for 10% shares. After one year, the company is worth 200,000. Because you are a 10% owner, your shares are worth 20,000.

The calculation formula for ROI is then as follows:

20,000 (the value of your shares) / 10,000 (your investment) = 200%.

Calculate ROI for the investment in advertisements

You can calculate your ROI for advertising investments if you know what you want in return. Usually this is what you earn by selling or new users who want to buy something later or immediately.

Scenario 2

You invest 10,000 in advertisements and want to make a turnover. Your average sales amount is 50, on which you make 20 margin. After the advertising campaign, you wait a few more weeks to make sure that everyone who has come into contact with your product through the campaign has been able to buy something. (Not everyone decides to make a purchase immediately) It turns out that 1000 people have bought something and that means that you have 50,000 turnover and 20,000 net margin.

The calculation formula for ROI is then as follows:

20,000 (the net margin you made) / 10,000 (your investment) = 200%.

Scenario 3

It is also possible that you want new users/customers who will buy something in the coming years. In that case you will first have to calculate what a user/customer is worth. You can make an assumption how much a new user/customer will spend in the next 3 years and how much margin you will make on that. (3 years is a term generally used).

Suppose a customer buys in 3 years time for 500 and you make an average of 200 net margin on that. A customer is therefore worth 200. In this case, we assume that your advertising campaign of 10,000 has yielded exactly 100 customers.

The calculation formula for ROI is then as follows:

100 (the number of customers) X 200 (the net margin per customer in 3 years) = 20,000 (the net margin you will make) / 10,000 (your investment) = 200%.

Net and gross margin

There are costs to be incurred for each sale. These can be hours spent on purchasing, selling or logistics. But also direct expenses such as shipping costs. A common mistake is not to deduct the costs per sale from your gross margin first. Net margin is your gross margin after deducting all the costs you have to incur to make the sale.

If you want to know more about ROI or gross and net margin calculations, please contact a financial expert at TheONE

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