It depends on the risk and the alternative. Broad share markets have averaged roughly 7% to 10% a year over long periods, so that is a common benchmark for a passive investment. A business project should clear your cost of capital, meaning the interest rate on the debt funding it or the return you give up elsewhere, with a margin for the extra risk.

What is the difference between ROI and annualised return?

ROI is the total gain over the whole holding period and ignores time completely. Annualised return, also called compound annual growth rate, converts that into a constant yearly rate. A 50% total return is 22.47% a year over two years and only 4.14% a year over ten, which is why the annualised figure is the only fair comparison.

Should I include my own time as part of the investment?

Yes, if the alternative use of that time earned money. Costing two hundred hours of owner time at a realistic hourly rate often turns an apparently profitable side project into a loss. Leave it out only when you are comparing two options that consume the same amount of your time, since it then cancels out.

How do I calculate ROI on a marketing campaign?

Use the gross profit generated by the campaign as the value returned, not the revenue, because revenue includes the cost of the goods you had to supply. Enter the full campaign cost including agency fees and production as the amount invested. Quote the result as a total return, since campaign periods are too short to annualise sensibly.

Yes. If the value returned is less than the amount invested, ROI is negative and the annualised figure is negative too. A total loss where nothing comes back is a -100% return, and no holding period changes that, because there is nothing left to compound at any rate.

Why does a long holding period make a good return look worse?

Because annualising spreads the same gain across more years of compounding. Doubling your money is a 100% return either way, but it is 100% a year over one year and about 3.53% a year over twenty. The total figure flatters slow investments, which is exactly the distortion annualising is designed to remove.

ROI Calculator - Free, Shows Its Working

Why use this calculator

Return on investment is the one metric that lets a marketing campaign, a new machine, a property and a share parcel be lined up against each other, but the headline figure hides the single most important variable, which is time. A 50% return is outstanding over one year, ordinary over five and poor over twenty, yet all three are reported as 50% by a simple ROI sum.

This calculator reports the total return and the annualised equivalent together, so the comparison is honest. It also shows the payback multiple, which is how private equity and property investors usually talk about a deal, and it handles losses correctly rather than producing a meaningless result when the money returned is less than the money invested.

How to use it

Enter the total amount invested, counting everything that left your pocket rather than just the headline price: purchase cost, fees, stamp duty, legal costs, installation, and the value of your own unpaid time if you want an honest figure.
Enter the total value returned as everything that came back, which means the sale proceeds plus any income received along the way such as rent, dividends, interest or distributions, not just the final sale price.
Enter the holding period in years between the money going out and coming back, using decimals for part years so eighteen months is entered as 1.5 and one quarter as 0.25.
If the investment is still running, use its current market value as the amount returned and the time held so far, and read the result as an unrealised return.

What each result means

Return on investment: Total gain as a percentage of what you put in, over the whole holding period. It takes no account of how long that period was.
Net gain or loss: The dollar difference between what came back and what went in. Useful because a large percentage on a small base is still a small amount.
Annualised return: The constant yearly compound rate that produces the same result. This is the only figure that fairly compares investments held for different lengths of time.
Money returned per dollar invested: The payback multiple used in property and private equity. Above 1.00x means you finished ahead, before inflation and tax.

The formula

ROI % = ((Value returned − Amount invested) ÷ Amount invested) × 100

Where Amount invested is every dollar put in including costs and Value returned is every dollar received back including income.

Annualised return

% = ((Value returned ÷ Amount invested) ^ (1 ÷ Years) − 1) × 100, which is the compound annual growth rate, or CAGR: the single constant yearly rate that would turn the amount invested into the value returned over that number of years

The payback multiple is simply Value returned ÷ Amount invested, so 1.00x is breaking even.

How this number is used in practice

The benchmark you measure against matters more than the ROI itself. Broad share market indices have returned somewhere around 7% to 10% a year on average over long periods, so a business investment that annualises below that has to justify itself on strategic grounds rather than financial ones.

A business owner comparing a new machine against paying down a 9% business loan is really comparing the machine's annualised return against a guaranteed, risk-free 9%, which is a far higher bar than it first appears. Marketing works differently again: campaign ROI is usually measured over weeks, and a 200% return on a month-long campaign annualises into a number so large that the annualised figure stops being meaningful and the total return is the right measure.

Two adjustments separate a serious ROI from a flattering one. The first is counting all the costs. Property investors who compare purchase price with sale price and ignore stamp duty, legal fees, agent commission, land tax and maintenance routinely overstate their return by ten percentage points or more.

The second is taxation: a return inside superannuation, a company, a trust or a personal name can differ by a third after tax, and comparing pre-tax returns across different structures is not comparing like with like. Accountants also insist on opportunity cost, meaning the return you gave up by not doing the next best thing with the same money, which is why a positive ROI can still be the wrong decision.

Worked examples

$10,000 invested, $15,000 back after two years
Total ROI 50.00% and a $5,000.00 gain, but only 22.47% a year annualised at a 1.50x multiple.
$25,000 into an equipment upgrade, $40,000 of value recovered over five years
Total ROI 60.00%, which annualises to just 9.86% a year, close to a typical business cost of capital.
$8,000 into a product line that was wound up for $6,000 after three years
A loss: ROI -25.00%, a $2,000.00 shortfall, and -9.14% a year annualised.

When people use it

Deciding between two capital purchases competing for the same money
Reporting the return on a marketing campaign or trade show to a board
Comparing a property sale against shares held over a different number of years
Testing whether a project beats the cost of the debt used to fund it
Working out whether a renovation added more value than it cost
Converting a headline multiple quoted by a promoter into an annual rate

Tips

Always annualise before comparing. Two investments with identical total ROI can be a good deal and a bad one if they were held for different lengths of time.
Count every cost in the amount invested: fees, duties, legal work, installation and your own time. Leaving them out is what makes reported returns look better than they were.
Include income, not just the sale price. Rent, dividends and interest received during the holding period are part of the return.
Compare the annualised figure against what the money would have earned doing nothing risky, such as paying down business debt at its interest rate.
For campaigns measured in weeks, quote total return rather than annualised. Annualising a one-month result produces a number that is technically correct and practically absurd.
Returns before tax are not comparable across a company, a trust, superannuation and personal ownership. Compare after-tax returns when the structures differ.

What it assumes, and where it stops being accurate

All money goes in at the start and comes back at the end. Staged contributions or partial withdrawals need an internal rate of return calculation instead.
Income received during the period is treated as if it arrived at the end, so reinvested income earlier in the period is slightly understated.
Figures are before tax and before inflation. A 6% annualised return in a 3% inflation environment is closer to 3% in real purchasing power.
Opportunity cost is not included. A positive ROI can still be the wrong choice if the same money had a better use.
Not suitable for investments with irregular cash flows in and out, such as a rental property with lumpy capital works, without treating each as a separate calculation.
The annualised figure assumes smooth compounding. Real returns are volatile, and the same average can come from very different paths.

Terms used on this page

Return on investment: Total gain divided by the amount invested, expressed as a percentage of what was put in.
Annualised return: The constant yearly compound rate that would produce the same result over the holding period.
CAGR: Compound annual growth rate, the formal name for the annualised return on a single lump sum.
Payback multiple: Value returned divided by amount invested, so 2.00x means the money doubled.
Cost of capital: The return you must beat to justify an investment, usually the interest rate on the funds used.

Questions people ask

What is a good ROI?: It depends on the risk and the alternative. Broad share markets have averaged roughly 7% to 10% a year over long periods, so that is a common benchmark for a passive investment. A business project should clear your cost of capital, meaning the interest rate on the debt funding it or the return you give up elsewhere, with a margin for the extra risk.
What is the difference between ROI and annualised return?: ROI is the total gain over the whole holding period and ignores time completely. Annualised return, also called compound annual growth rate, converts that into a constant yearly rate. A 50% total return is 22.47% a year over two years and only 4.14% a year over ten, which is why the annualised figure is the only fair comparison.
Should I include my own time as part of the investment?: Yes, if the alternative use of that time earned money. Costing two hundred hours of owner time at a realistic hourly rate often turns an apparently profitable side project into a loss. Leave it out only when you are comparing two options that consume the same amount of your time, since it then cancels out.
How do I calculate ROI on a marketing campaign?: Use the gross profit generated by the campaign as the value returned, not the revenue, because revenue includes the cost of the goods you had to supply. Enter the full campaign cost including agency fees and production as the amount invested. Quote the result as a total return, since campaign periods are too short to annualise sensibly.
Can ROI be negative?: Yes. If the value returned is less than the amount invested, ROI is negative and the annualised figure is negative too. A total loss where nothing comes back is a -100% return, and no holding period changes that, because there is nothing left to compound at any rate.
Why does a long holding period make a good return look worse?: Because annualising spreads the same gain across more years of compounding. Doubling your money is a 100% return either way, but it is 100% a year over one year and about 3.53% a year over twenty. The total figure flatters slow investments, which is exactly the distortion annualising is designed to remove.

Use this with

ROI Calculator answers one part of the question. These pick up where it stops: Investment Return Calculator, Renovation ROI Calculator, Profit Margin Calculator and Break-Even Calculator.

Where these figures come from

Works anywhere· 2026Last reviewed 2026-09·How we build and check calculators

This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.

ASIC Moneysmart. Independent guidance on investment returns, risk and fees
U.S. Small Business Administration. Pricing, break-even and financial planning guidance for US businesses
business.gov.au: Australian Government business portal. Official guidance on pricing, cash flow and financial management for small business

ROI Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.

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