Not many people understand the concept of ROI so I thought I’d take a quick few minutes to explain.
ROI is basically the % increase of your initial investment. Check the below vid for clarification.
For example if you put in $100 and got back $200, you’ve received 100% ROI on your investment.
If you put in $50 and got back $25, Then you’ve recieved -50% ROI on your investment.
It’s a metric that tells you how hard your money is working for you and where you’re getting the most value out of your dollars.
The way to calculate it is to divide the initial investment by profit/loss.
E.g, for the first example of $100 investment and $200 return you’ve made $100 profit. So our ROI is,
100/100 = 1
1 x 100 = 100%, (remember you multiply the initial formula by 100 to get it into ‘percentage’.)
For the example of $50 investment and $30 return,
$50 – $30 = $20
20/50 = 0.4
0.4 x 100 = 40%
Since it’s a ‘loss’ it’s -40% ROI.
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