Return on investment, or ROI, is a mathematical formula that investors can use to evaluate their investments and judge how well a particular investment has performed compared to others. However, a proper ROI measurement considers more than just revenue, it also considers leads, sales, customer lifetime value, and conversion quality. A higher ROI indicates a more profitable investment.

An ROI calculation is sometimes used with other approaches to develop a business case for a given proposal. The overall ROI for an enterprise is used as a way to grade how well a company is managed.

How do you calculate ROI

ROI = (Revenue – Ad Spend) / Ad Spend x 100%.

Key Metrics to Track for ROI

1. Cost Per Click (CPC)

• How much you pay for each click on your ad.
• Lower CPC = more traffic for the same budget.

2. Conversion Rate (CR)

• What % of people who clicked actually took action (purchase, signup, etc.)
• Higher conversion = better ROI.

3. Cost Per Acquisition (CPA)

• How much you spend to get one customer or lead.
• Lower CPA = higher efficiency.

4. Customer Lifetime Value (CLTV)

• If your customer buys repeatedly, ROI increases even if CPA is high.

5. Revenue Generated

• Track sales directly tied to your ad campaigns using UTM tracking and conversion pixels.