Return on investment (ROI) refers to the ratio of return to investment. With ROI you determine whether an investment generates turnover and is profitable. Therefore, ROI is usually used as a KPI. Furthermore, you can use ROI for both long-term and short-term decisions. In this way, ROI influences sales and marketing strategy, among other things.
Calculating ROI has a number of advantages. First of all, with ROI you can see the prospect of an investment. It also measures the potential return on investment and measures the competition in the market.
You can calculate the ROI using a formula:
ROI = (investment income - investment cost) / investment cost.
This gives you the ROI percentage. This must be a positive number, otherwise the investment will result in a loss. The ideal ROI varies from company to company, but a start-up usually aims for an ROI of around 15%.