Return on Investment (ROI)
A performance measure that evaluates the profitability of an investment, calculated by dividing the net profit by the cost of the investment.
Return on investment is the ultimate measure of whether your marketing spend is generating profit. The formula is straightforward: subtract your marketing cost from the revenue it generated, then divide by the marketing cost. If you spend $1,000 on a Google Ads campaign that produces $4,000 in revenue, your ROI is 300%. A positive ROI means you’re making money; a negative ROI means you’re losing it.
For small businesses operating on tight budgets, tracking ROI across your marketing channels is essential for making smart spending decisions. You need to know which channels — Google Ads, Facebook, email marketing, SEO, networking events — actually generate profitable returns. Without ROI tracking, you’re essentially guessing where to invest your limited marketing dollars.
Calculating marketing ROI accurately requires proper tracking and attribution. Use UTM parameters on your campaign links, set up conversion tracking in Google Analytics, and maintain records of which leads came from which source. For service businesses where the sale doesn’t happen online, you need a way to ask new customers how they found you and track that in your CRM. Imperfect tracking is still far better than no tracking at all.
Keep in mind that ROI timelines vary by channel. Paid advertising can show ROI within days or weeks. Content marketing and SEO might take six to twelve months to produce measurable returns, but those returns tend to compound over time. Email marketing to existing customers often delivers the highest ROI of any channel because the audience already knows and trusts you. Evaluate each channel on an appropriate timeline before deciding to cut or increase spending.