ROI Meaning in Plain English
The basic formula is ROI = (Return - Cost) / Cost x 100. Before using it, decide what "return" means and keep the comparison consistent.
Revenue and profit are not interchangeable. If a campaign produces $1,500 in revenue after $1,000 of spending, the full $1,500 is not automatically profit. Product costs, labor, fees, and other expenses may reduce the actual return.
Example
If a business defines $1,500 as profit attributable to a $1,000 campaign, the calculation is ($1,500 - $1,000) / $1,000 x 100 = 50% ROI.
Why It Matters
ROI can make different investments easier to compare, but attribution, time period, margins, and incomplete cost data can change the result substantially.