Why is my ROI negative?

The cost of acquiring a customer (CAC) exceeds the profit from it. It is necessary to either reduce the cost of advertising (increase conversion), or increase the average check (LTV).

MARKETINGGlossary

ROI (Return on Investment)

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PPC and SEO Marketing

ROI (Return on Investment) is the main metric for a business owner. It answers one simple question: "Did the money I invested pay off?". If you invested $1,000 in advertising and earned $3,000, your marketing is doing great. If you invested 1000 and earned 500 - you lose money.

How to calculate ROI?

The formula is very simple: ROI = ((Return on investment - Size of investment) / Size of investment) × 100%

Example: You paid the agency $2000 to set up the ad. Thanks to this ad, you made a net profit of $6000. ((6000 - 2000) / 2000) × 100% = 200%.

Your ROI was 200%. This means that every dollar invested has earned you $2 in net profit on top.

ROI vs ROMI

Marketers often use the term ROMI (Return on Marketing Investment). This is the same as ROI, but applies exclusively to marketing spend. Classic ROI takes into account all business expenses (rent, salaries, taxes).

Why calculate ROI?

01Redistribution of the budget

If the ROI from Google Ads is 300% and from Facebook Ads -50% (loss), you turn off Facebook and send all the money to Google.

02Protection of investments

It is easier for you to agree on a budget of $10,000 for a new CRM if you can prove to the investor that it will pay for itself (show a positive ROI) in 6 months due to automation.

/ FAQ

Any ROI greater than 0% means you're in the black. But usually a good indicator for marketing campaigns is between 100% and 300%.

ROI (Return on Investment)

/ ROI (Return on Investment)

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