Return On Investment

make it worth the effort


ROI, or Return on Investment, stands as a valuable metric for strategic planning. The core idea is simple: maximize the value you gain over time while minimizing the costs incurred to achieve that value. By quantifying this trade-off, you can keep your focus on activities or tasks that contribute the most value to your organization, project, customers, or even your personal life.

The basic formula to calculate ROI is: Value Gained / Cost of activity.

In business, evaluating the “Value” and “Cost” of activities and projects is a common challenge. Simplifying this, we often use the metric “money earned / money invested” to measure the desirability of an endeavour. While this approach is undoubtedly useful, it doesn’t capture all the gains, some of which are intangible. There are those that attempt to assign monetary value to everything, but this can be ethically challenging.

Consider this: How can you put a price on a human life or quantify the positive impact on someone’s self-esteem and daily life? These questions venture into deep philosophical territory, which we won’t delve into further here. What’s essential to remember is that there’s often more to gain from a project or activity than just money. Even if we could quantify these “intangible” gains, predicting the future remains impossible. Therefore, the definition of “value gained” will always be subjective.

While subjectivity is an inherent aspect of any forecasting approach, it doesn’t undermine the empirical method of analysing trade-offs. Statistics provide a formalized means of comparing different situations and contexts, aiding individuals and organizations in shaping their strategies. The true value of statistics doesn’t lie in the absolute numbers they offer but in how we interpret them and the actions we take based on that interpretation.

The same applies to metrics like ROI. ROI should be seen as one of many tools that guide decision-making. Nevertheless, it’s crucial to understand that the power of ROI lies in your ability to interpret the data and make informed decisions. The persons defining what “value” and “cost” mean for their context ultimately decide what factors to include in their strategic decision-making process. Hence, the effectiveness of the ROI metric hinges on the contextual knowledge and expertise of the individual or group defining its inputs.


Say you are a manager and have three different projects that your team could work on. Each of them has been analysed, and has an estimated future income and estimated development cost assigned to them. You can choose one of these for your team to work on:

  • Option 1: Estimated income = 15'000 EUR ; Estimated costs = 5'000 EUR
  • Option 2: Estimated income = 1'850'000 EUR ; Estimated costs = 750'000 EUR
  • Option 3: Estimated income = 1'000 EUR ; Estimated costs = 200 EUR

The expected Return On Investment for each of these options are:

  • Option 1: ROI = 200%
  • Option 2: ROI = 146%
  • Option 3: ROI = 400%

From this we see that option 3 provides the most bang-for-buck. If we only consider ROI, you want to go ahead and work on that one first.