Harvard Business Review Guides Ultimate Boxed Set (16 Books)

Chapter 10

Calculate ROI

Return on investment (ROI) is a more pointed look at the financial value of your proposal. Think of it as a measure of relative “goodness” because it helps organizations compare projects and decide which ones to pursue.

Good news for mathphobes: It takes nanoseconds to calculate ROI in a spreadsheet (Excel saves you from doing fifth-order partial differential equations by hand). Many companies have templates, like the one in figure 10-1, where you just plug in your numbers and the software does the rest.

Here’s the classic formula for ROI:

ROI = Net Benefit/Total Cost

(Net benefit is the total benefit minus the total cost.)

A positive ROI is good. A negative one means the project’s not worth doing. The larger the ROI ...