ROI Calculator

ROI (Return on Investment) is a financial metric that measures the profitability of an investment relative to its cost. It is expressed as a percentage and calculated by dividing the net profit by the initial investment. ROI helps investors evaluate the efficiency of investments and compare different opportunities.

ROI is calculated using the formula: ROI = ((Final Value - Initial Investment) / Initial Investment) × 100. For example, if you invested $10,000 and it grew to $15,000, your ROI would be (($15,000 - $10,000) / $10,000) × 100 = 50%.

A "good" ROI varies by investment type and risk level. Generally: Stock market averages 7-10% annually, real estate typically returns 8-12%, and business investments often target 15-25%+ ROI. Always compare to alternative investments and account for risk and inflation. For SaaS founders, pricing has one of the highest ROI levers available — our SaaS pricing strategy guide explains how to maximize returns through smart pricing.

ROI measures total return regardless of time period, while CAGR (Compound Annual Growth Rate) calculates the average annual return over multiple years. CAGR accounts for compounding and is better for comparing investments of different durations. For example, a 100% ROI over 5 years equals a CAGR of about 14.9% per year.

CAGR is calculated using: CAGR = ((Final Value / Initial Investment) ^ (1 / Years)) - 1. For example, if $10,000 grew to $20,000 over 5 years: CAGR = (($20,000 / $10,000) ^ (1/5)) - 1 = 14.87%. This means the investment grew at an average rate of 14.87% per year, compounded annually.

It depends on context. Stock market averages 7-10% annually. Real estate typically returns 8-12%. Business investments target 15-25%+. SaaS companies target 3-5x ROI on customer acquisition (200-400%). Any ROI above your cost of capital is technically positive, but aim for at least 15-20% to justify the risk and opportunity cost.

Annualized ROI = ((1 + ROI)^(1/years) - 1) × 100. A 50% return over 2 years annualizes to 22.5%. A 140% return over 6 months (0.5 years) annualizes to approximately 476%. Annualizing makes it easier to compare investments with different time horizons.

ROI is a percentage relative to your initial investment. Total return is the absolute dollar gain. If you invest $10K and get back $15K, your total return is $5K and your ROI is 50%. ROI is better for comparing investments of different sizes. Total return tells you the actual dollar impact on your bottom line.