The ROI formula
ROI % = ((Total return − Initial investment) ÷ Initial investment) × 100
That's the whole formula. Everything else — payback period, annualised ROI, NPV — is a refinement of those three inputs.
Step 1 — Initial investment
Add up every pound that leaves the business to make the investment happen: purchase price, installation, training, the first month's subscription, agency setup fee. Be honest now or the ROI looks better than it really is.
Step 2 — Monthly net benefit
The extra profit the investment generates each month — not extra revenue. Subtract anything new it costs you: electricity, consumables, ad spend, the supplier's monthly fee. If a £10k machine adds £4,000 in revenue but burns £1,500 in running costs, your monthly net benefit is £2,500.
Step 3 — Pick a horizon
12 months is the default. Use 24 or 36 months for assets with longer useful lives (vehicles, larger equipment, software platforms). Always state the horizon — "50% ROI" means very different things over 1 vs 5 years.
Step 4 — Apply the formula
Multiply step 2 by step 3, subtract step 1, divide by step 1, multiply by 100. The calculator above does this live as you type.
Annualised ROI — why it matters
A 60% ROI over 3 years sounds great until you realise it's only about 17% per year — below what many UK small businesses target. Annualised ROI (also called CAGR for investments) is the only fair way to compare decisions with different time horizons.
What this still doesn't capture
The simple formula ignores tax relief, depreciation, the time-value of money, and risk. For decisions over £5–10k, use the full ROIify industry modeler — it adds those layers and gives you a number you can defend to an accountant or a lender.