How to use this ROI calculator
- Put in what you spent.
That’s your total cost in that activity. Whether its ad spend, management fees, printing, design, hourly pay, taxes, software seats, or equipment financing/interest expense. All of those are examples of cost related to a specific activity. - Put in what you got back.
This is the part that matters. Depending on the level you’re calculating, don’t use something like total revenue. If you do that, the output may be misleading. We want to look at calls or work generated from that campaign, promos etc. we want to know what money came back from each activity and the source the expense is tied to. - Hit Calculate.
Why to use it
Sometimes business owners will make the same mistake over and over:
- They kill something that was actually working because “it felt slow.” The reality is that sometimes slow is good – slow can often mean long-term growth and its scalable.
- Or they keep paying for something because “it feels busy.” The reality here is that busy is not always good – useless activities usually cost more than they’re worth.
Understanding your return from an activity fixes that problem. It may take some time to get the return, but once you do, calculate it and determine if its an activity you want to continue to participate in, based on the return.
Always ask yourself: For every $1 I spent, how many dollars came back? If it’s not paying back strong enough, you, fix leaks, or stop. In most cases a good benchmark is $3 returned for ever $1 spent. But that depends much on your overhead.
Accountability
Being accountable is required to accurate measurements when it comes to ROI. For example, when running an advertising campaign, its incredibly important to understand how to “give” a sale to that campaign. If you know definitely where it came from, you can understand what’s an actual return. Fuzzy data is bad data.
A simple use case
You run ads for “electrical repair near me” and you want it to lead into bigger tickets. In this case, we’re measuring the ROI from the ad campaign. You can also calculate the ROAS which is a different measurement (return on ad spend) here. But with this we can even calculate each different job and break it down to profitability.
What you spent:
$3,250 total (ads + management)
What you made back:
$16,196 from the jobs that came from those calls
What that means:
That’s about 5:1. For every $1 you spent, you got about $5 back.
How the calculator rates it:
398% ROI = Needs improvement
