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Return on investment, or ROI, is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment and shown as a percentage of increase or decrease in the value of the investment during the year in question. The basic formula for ROI is: ROI = Net Profit / Total Investment * 100.
A good marketing ROI is 5:1. A ratio over 5:1 is considered strong for most businesses, and a 10:1 ratio is exceptional. Achieving a ratio higher than 10:1 ratio is possible, but it shouldn't be the expectation. Your target ratio is largely dependent on your cost structure and will vary depending on your industry.
A perfect return on investment for an active investor is 15% annually. It's aggressive, but it's achievable if you put in time to look for bargains. ROI, or Return on Investment, measures the efficiency of an investment.
A good marketing ROI is 5:1. A ratio over 5:1 is considered strong for most businesses, and a 10:1 ratio is exceptional. Achieving a ratio higher than 10:1 ratio is possible, but it shouldn't be the expectation. Your target ratio is largely dependent on your cost structure and will vary depending on your industry.
Most people would agree that, over time, an average annual return of 5 to 12 percent on your passive investment dollars is good, and anything higher than 12 percent is excellent. This also means that we expect the return to be significantly higher for a franchise than for a passive investment.
The current average annual return from 1923 (the year of the S&P's inception) through 2016 is 12.25%. That's a long look back, and most people aren't interested in what happened in the market 80 years ago.
The proper way to calculate a return is using the “cash flow method”, it should meet at least 15% ROI minimum in your first year, and you are in a good business if you could reach 20 to 25% annual profit vs capital. Good restaurant business require sustainability over 5 years.
If you're tracking monetary return on investment (ROI) as the sole criterion to determine if your marketing programs are working, then you need to catch up to the 21st century because you're missing a big part of the picture. No longer does ROI stand only for return on investment.
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