Free calculator
Free ROI calculator
Return on investment turns a spending decision into a comparable number. Enter what you invested and the yearly gain it produces to see ROI, the return multiple, and how long until the investment pays for itself.
Compare what you put in with what comes back
= Rs. 500k
Profit attributable to the investment = Rs. 200k
- Total gain over 3y
- Rs. 600,000.00
- ROI
- 20.0%
- Return multiple
- 1.20x
- Payback period
- 2.5 years
How the formula works
ROI = (total gain minus investment) divided by investment. The return multiple is total gain divided by investment. Payback is investment divided by annual gain: the time before cumulative gains cover the original outlay.
Worked example
A Rs. 500,000 espresso machine adds Rs. 200,000 of yearly profit. Over three years that is Rs. 600,000 of gain, so ROI is 20 percent, the multiple is 1.2x, and payback takes 2.5 years. Compare that against leaving the money in a 10 percent instrument to judge whether the risk is worth it.
Common mistakes
- Counting revenue as gain instead of profit attributable to the investment.
- Ignoring ongoing maintenance costs that reduce the yearly gain.
- Comparing ROIs over different horizons without annualizing.
- Forgetting the time value of money; a 3-year payback is riskier than a 1-year one.
Frequently asked questions
What is a good ROI?
It depends on risk and alternatives. Many small businesses target at least beating safe returns by a wide margin, often 20 percent or more annually.
Should I include my own labor?
If the investment saves your time, value those hours and include them as part of the gain; otherwise you are hiding real costs.
How is this different from NPV?
NPV discounts future cash flows to today's value. ROI is simpler but ignores timing, which is why payback is shown alongside.
Related tools
Results are arithmetic on the numbers you enter, not predictions. Validate important figures with an accountant before making financial commitments.