Return on investment (ROI)
In short
Return on investment (ROI) is a measure of the gain or loss from an investment relative to what it cost. It is usually expressed as a percentage, so very different projects can be compared on the same scale.
In go-to-market work, ROI is used to judge campaigns, tools, hires, and channels. A positive ROI means the return exceeded the cost, but the figure is only as reliable as the numbers and time frame behind it.
The ROI formula
ROI equals (gain from investment minus cost of investment) divided by cost of investment, times 100.
For example, say a team spends 10,000 on a campaign that leads to 25,000 in gross profit. The gain minus cost is 15,000, divided by 10,000, so ROI is 150%.
How GTM teams use ROI
- Campaigns: Compare programs by revenue or profit created per dollar spent.
- Tools: Weigh the subscription and setup cost against time saved or revenue gained.
- Channels: Decide where to shift budget by comparing return across channels.
- Hires: Estimate output per rep against fully loaded cost.
What to count
Costs
Include more than the sticker price: staff time, setup, training, media spend, and ongoing fees.
Gains
Use revenue or profit that can be traced to the investment. Profit is a stricter measure than revenue.
Time frame
Pick a period that fits the sales cycle. A long B2B cycle makes a 30-day ROI misleading.
Limits of ROI
ROI ignores timing, so a slow 100% return and a fast one look the same. It also depends on attribution, which is rarely exact in B2B. Pair it with payback period and pipeline measures. Related but different: return on marketing investment applies the idea specifically to marketing spend.
Common mistakes
- Leaving out hidden costs: Staff time can be the largest cost.
- Over-crediting a single touch: Many touches influence a deal.
- Judging too early: Slow cycles need patience.
- Comparing unlike things: Make sure revenue and profit are not mixed.
Return on investment (ROI) FAQs
What is return on investment (ROI)?
Return on investment measures the gain or loss from an investment relative to its cost, usually as a percentage. It lets teams compare different campaigns, tools, or projects on the same basis to decide where to spend.
How do you calculate ROI?
Subtract the cost of the investment from the gain, divide by the cost, and multiply by 100. For example, a gain of 25,000 on a 10,000 cost gives an ROI of 150%.
How do you measure ROI for a B2B marketing campaign?
Add up all costs, including media and staff time, then compare them with the revenue or profit traced to the campaign. Use a time frame that matches your sales cycle, since B2B deals often close months later.
What are the limitations of ROI?
ROI ignores how long a return takes and relies on attribution, which can be imprecise. It also depends on which costs and gains you count. Using it with payback period and pipeline metrics gives a fuller picture.
