ROI is the return on an investment. For example, I spend $20 on widget A, I make $10 worth of changes to it in my manufacturing process, (Total cost now $30) and then I sell it for $55.50 how much money did I gain from that investment? $25.50. As a percentage that would be an ROI of 45.9%.
Knowing your ROI is important as it may make or break your business. If you spend $10 to garnish each lead and each lead only brings in $1 of profit you may want to revisit your lead generation tactics.
Tracking ROI is a great way to ensure that your business is only taking part in profitable activities.
To calculate ROI following this formula:
ROI = (Gain from investment- cost of investment) / cost of investment.
By tracking ROI you will know what areas of your business activities are paying off cand which are ascwasdte of time.