ROI Explained in Plain English (And Why It Matters Even for Solopreneurs)

ROI, or Return on Investment, is a measurement that tells you how much money you get back compared to how much you put in. It shows whether something you spend money on is profitable and by how much. ROI is typically expressed as a percentage that represents your profit relative to your investment.

Imagine you spend $100 on online advertising for your small business. After running the ads for a month, you make $300 in sales directly from those ads.

Your ROI calculation would be:

Figure out your profit:

$300 (sales) - $100 (cost) = $200 profit

Calculate ROI: ($200 profit ÷ $100 investment) × 100 = 200% ROI

This means for every $1 you invested, you got $2 back in profit—a 200% return.

Any positive ROI means you're making money, but what's considered 'good' varies by industry and type of investment.

ROI helps you make smarter decisions about where to put your money and time. Even if you're a solopreneur with limited resources, calculating ROI prevents you from pouring money into activities that aren't actually benefiting your business. It helps you identify which efforts are worth continuing and which should be reconsidered.

ROI is a straightforward way to measure whether your investments are making you money, helping you focus your resources on what truly works for your business.

For solopreneurs, ROI isn't just about direct cash returns. Consider time savings too!

Example:

If you invest $200 in a tool that saves you 10 hours per month (valued at $50/hour), that's $500 worth of time saved monthly.

Your ROI would be 150% ((500-200)/200 × 100), plus you get valuable time back to grow your business.