A RoI calculator usually requires a simple calculation along the lines of:
RoI (%) = Net Gain ($) / Total Cost of Investment ($) * 100
Let’s break down this calculation with an example of calculating RoI of buying a subscription to the Outgrow Platform.
The first input we need is the Net Profit or simply put, how much money can one make net of costs. In formula terms:
Net Gain ($) = Marginal Gross Profit from Investment ($) - Total Investment ($)
While total investment is a an easy number to discern (since you are the seller you already know that answer), calculating Marginal Gross Profit can be slightly tricky and needs to be broken down further:
Marginal Gross Profit ($) = New Customers (#) x Marginal Gross Profit Per Customer ($)
Note: Marginal Gross Profit per customer is sometimes referred to as Customer Lifetime value.
The customer will usually know the revenue per customer but might need help calculating the number of new customers he can get from calculators. That will not be obvious up front.
New Customers (#) = Number of New Prospects x Sales Conversion Rate
For Outgrow, we know that our calculators increase conversions on landing pages by 28% on an average. Hence, the number of prospects or leads generated will be 28% more.
New Customers From Calculators (#) = (Current Number of Prospects x 28%) x Sales Conversion Rate
The current number of prospects and the sales conversion rates are both numbers that our users should know without any further breakdown. So our final formula break down will be:
RoI (%) = Net Gain ($) / Total Investment ($) x 100
RoI (%) = (Marginal Gross Profit from Investment ($) - Total Investment ($)) / Total Investment ($) x 100
RoI (%) = ((New Customers from Investment (#) x Marginal Gross Profit Per Customer ($)) - Total Investment ($)) / Total Investment ($) x 100
RoI (%) = ((((28% of Current Number of Prospects) x Sales Conversion Rate) x Marginal Gross Profit Per Customer ($)) - Total Investment ($)) / Total Investment ($) x 100
So the entire calculator requires 3 simple inputs from the user and can calculate RoI.
Here, try this calculator in action.
Updated almost 5 years ago