Customer Acquisition Cost
MarketingWhat it costs, fully loaded, to win one new customer — every dollar of ad spend, salary, software, and sales commission divided by the number of customers you…
Business & Strategy
Return on Investment
ROI
Robert KlimantCo-founder
What is Return on Investment?
Return on Investment, or ROI, is a financial metric that measures the gain or loss generated on an investment relative to the amount invested. The standard formula is net return divided by cost, expressed as a percentage. ROI is used to evaluate the efficiency of a single spend or compare the relative performance of several. It applies to anything measurable in dollars in and dollars out, from ad campaigns to website rebuilds.
Why it matters
Every line item in a marketing budget eventually gets a question. What did this make us. ROI is the language that question is answered in. The trap is treating it as a single number rather than a range. A website rebuild that costs 150k and lifts conversion 30 percent pays for itself in months at scale, and in years at low traffic. Same project, different ROI. Buyers who ignore the time horizon, the assumptions, and the counterfactual end up funding the wrong things confidently. The number is useful. The thinking behind it is what actually matters.
How it works
Start with the cost, fully loaded. Include the invoice, the internal time spent reviewing, the opportunity cost of not doing the next thing. Then measure the return over a defined window — six months, twelve, twenty-four. Subtract cost from return, divide by cost, multiply by a hundred. That percentage is your ROI. For a website, the return might be added pipeline, reduced support tickets, faster sales cycles, or higher conversion rate. Pick the metric that ties to revenue, agree on the baseline before the project starts, and check the number on a calendar — not just when someone needs to defend the spend in a board meeting.
Related terms
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