What is ROI - and how to calculate correctly

What is ROI?

ROI is a measure made by comparing the amount of money I put in and the investment that came out.
Positive return on investment - Says that the marketing activity actually generated profits means more revenue than expenses.
Negative return on investment - says that the expenses exceeded the income of the business or, in Israeli parlance, an unsuccessful month.

How is ROI calculated?

The truth - quite simply,
Divided income to expenses = return on investment
For example:
20,000/1000=20
That means a return on investment of 20.

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But of course there is a lot of data beyond

Whether you own an ecommerce store, or whether you are service providers you have expenses for the business of course.

In the calculation of the expenses of the advertising budget, all costs accompanying the sale of the product must be entered into the calculation of the expenses of the advertising budget:

• Forwarding and Logistics
• paperboard
• Cost of manufacturing the product
• Credit Clearing
• Customer Service
• Systems and software that are used by the store

And there are many more and each depending on his business it changes.

Of course, we did not take into account here the cost of the administration fee for the reseller, the income tax, social security and VAT.

For the optimal calculation of return on investment as well as to understand the profit margin of the business it is very important to insert into the Excel table or Munday (I use it) and calculate all the data to figure out whether we are indeed profitable or the opposite forbid.

Let's translate this into sponsored advertising

Let's say you or your marketer spent a budget on Google of 1,000 shekels in August.

Revenues in the same month were 10,000 shekels.

The return on investment here will be 10 times. But let's say that for the purposes of the example, the business expenses (shipping, production, logistics, clearing, etc.) that accompanied these sales total was 2,000 shekels.

1,000+2,000=3,000 shekels spent

10,000/3,000=3.33 ROI

Pay attention to how you calculate all business expenses. We understand the real ROI of the business.