What is ROI (Return on Investment)?
Return on Investment help business to know how effective your investments in generating Income.
Whenever someone invests their money or time in their business, everyone will have a goal in their mind to achieve & a proper way or technique to calculate the ROI to know whether you achieved your goal or not.
Calculating ROI helps you to know whether the plan/technique is working or not so that you can change according to your goal.
How to Calculate ROI ?
Return on Investment (ROI) shows the financial benefits achieved by investing in a business. In other words, ROI is what you get back on in return for the expense done.
ROI represents the rational value or percentage of & calculated by dividing the gain & the net profit earned on the investment done. The Formula of Calculating ROI is.
ROI= Net Benefits / Total Cost.
How Does Return on Investment (ROI) Work?
If you invest 2000 $ a month to promote your business by PPC Advertisements & generates 4200 $ revenue from your PPC advertisement campaign. Here you have to divide the Revenue by the total investments done & multiply it by 100 to find the Return on Investment. Want to know more about PPC Advertisement check our latest Blog on Pay Per Click Advertisement
Let’s calculate ROI:
R.O.I = (2200 $ / 2000$) X 100
= 110 % will be your profit.
Why ROI is important for business?
Monitoring Return on Investment is an important part of a business that helps businesses to survive in the industry. Monitoring ROI helps companies to modify their strategies to increase their ROI.
Limitations of Return on Investment ROI?
- Difficulty in getting the proper definition of Profit.
- If someone performs SEO for their website, you may not able to find the accurate investment.
- Difficult to compare ROI of different companies.
- ROI may not be beneficial for long-term results.
Hope this article will help you to understand the basic about what Return on Investment is? How to calculate ROI? How Does It Work? Calculating ROI is important for everyone to monitor their achievements & to survive in the market. Don’t ignore ROI monitoring ROI may help you to enhance your business globally.