Measuring efficiency and return on investment when doing business is extremely important for investors. This work requires precision, meticulousness and extremely difficult. However, a tool, a unit to help you solve the difficulty of measuring profit, business rate is simply ROI. So what is ROI? How to calculate ROI? All will be answered by VSM for customers in the following article..

What is ROI?Instructions on how to calculate the most accurate ROI

What is ROI
what is the ROI

What is the ROI?

Along with the general development of the market economy, the concept of ROI is gradually becoming popular and becoming a term in business, specifically in SEO and Marketing. However, not everyone fully understands ROI. So what is ROI?

What is ROI?
What is the ROI?

ROI is an acronym for Return On Investment, which is an indicator that measures the percentage of revenue over total investment costs. Or more specifically, ROI is the result of measuring the net return, the return on investment brought after a process, a business period.

This is an index, a formula used by businesses and companies to measure business and investment campaigns. In which, if the measurement results, the higher the ROI, the business has made the right investment and brought in quite high profits. Conversely, if the ROI is low, the investment company or business has not been effective, so it is advisable to change the strategy or redirect the next investment to avoid further heavy losses.

The results of the ROI formula are often referred to as positive ROI and negative ROI. In which, if the ROI is positive, the return on investment capital is greater than the total initial investment cost. On the other hand, if the ROI is negative, the business is in a state of loss, the total sales revenue is lower than the initial investment cost.

Therefore, when you want to implement the ROI calculation formula, the calculator needs to accurately determine the total investment cost as well as the total sales revenue. This is a commonly used indicator to measure the main measurement in SEO and marketing campaigns.

Benefits of using, measuring ROI

VSM helped customers to answer what is ROI? The next thing customers need to “conquer” when learning about ROI is what the benefits of this measurement are. Once the benefits are identified, the customer will decide whether to apply the ROI index to measure business performance or not?

Here are some of the key benefits of ROI for VSM to share with you:

Analyze the return on investment

ROI analyze investment efficiency quickly
ROI analyzes investment efficiency quickly

The practical, important benefit, the ultimate purpose of calculating ROI is to help business owners and companies analyze investment efficiency. It is this result that will help customers answer whether this investment campaign is effective or not, whether the investment tool is correct or not, and what benefits this investment will bring to the business and the company.</span >

Easy to do comparisons

Not only helps to analyze investment performance and ROI, but also helps customers make other comparisons. When calculating ROI, investors will know which campaign they should invest in to get the best return when comparing campaigns with each other.

With campaigns that have negative ROI, businesses will stop investing to focus on campaigns with positive ROI in that period.

Gives an overview

ROI provides an overview of the project or campaign
ROI provides an overview of the project, campaign

The next benefit that you will notice when using the ROI calculation method in your business is that you will have an overview of the business campaign, effective . Once the general calculation table is in hand, the manager will calculate the profitability of the project, thereby making a decision whether to develop or suspend investment for the project or campaign.

Simple calculation 

The final benefit of ROI that VSM shares in this article for customers is to help businesses simplify the calculation stages in business. Because when applying ROI, customers only need to earn two exact figures: total sales and total investment costs.

Business Profit Calculations Simplified
Simplify business profit calculation

So the benefits that ROI bring to businesses and companies are quite a lot, practical and extremely important to accelerate development. At the same time, ROI helps businesses grow on today’s modern digital technology race.

The most accurate ROI formulas today

So what is ROI as well as the benefits that ROI brings are quite practical, this must be the formula that many businesses and companies have been looking for so far. So what is the ROI calculation formula, are there ways to calculate it to achieve the highest accuracy.

Exact ROI formula
Exact ROI formula

Basically, businesses and companies now have 2 popular formulas to calculate ROI.

  • ROI Formula #1: ROI= (Net Profit/Investment Cost) x 100

In this formula:

+ Net profit = Total revenue – Investment cost

+ Investment cost = Fixed cost + variable cost

One thing to keep in mind when a business chooses this formula is to determine its Fixed and Variable Costs. With fixed costs, they are costs that do not change and are closely related to production scale and sales level. On the other hand, variable costs are expenses that will be changed according to the scale of production and business sales.

  • ROI Formula #2: ROI= [ (Final Profit – Initial Profit) / Investment Cost ] x 100

In the above formula:

+ Final profit – Main initial profit = net income (after tax) of the business.

+ Investment cost = Fixed cost + variable cost

Depending on the type of business, the ultimate goal when receiving the ROI index is that you choose the most appropriate formula. However, according to the survey, with the 2 VSM formulas introduced above, formula 1 is used quite commonly, especially in calculating SEO, marketing or business projects of companies and businesses.

What is the ROI measurement FAQ for SEO

What is the ROI as well as the ROI calculation formula introduced in detail by VSM to customers. This ROI based rate of return is quite commonly used in SEO. However, there are many questions when businesses choose this business profit calculation formula. Below VSM will answer some questions for customers when measuring ROI for SEO.

Answer some questions related to SEO ROI
Answer some questions related to SEO ROI

When to measure SEO ROI?

In general, when choosing ROI as a general measurement formula, we often choose when the campaign or project has gone 1/2 or measured by month or quarter. For SEO, too, you should choose to measure ROI by month, quarter, and year. Because SEO is a long process that takes time to achieve the best results,

What is a good SEO ROI?

A concept, term used in SEO when applying the ROI formula is good SEO ROI. So what does this term mean?

Good SEO ROI is understood as a positive return on investment ROI, the profit ratio is sometimes 2 times or more than 2 times the total initial investment. Therefore, when doing SEO, you should set a strategic goal of how much ROI to measure development.

Thus, the above article VSM has helped customers explain in detail what ROI is. At the same time, it also provides the most practical, detailed and important information about the rate of return based on invested capital. If you need to learn more, please contact VSM for detailed advice and answers.