How to Calculate Project R O I
What is Project R O I?
Calculates return on investment for projects comparing benefits to costs. Helps prioritize which projects to fund.
Formula
Calculate: ROI = (benefits - costs) ÷ costs × 100%
- ROI
- (benefits - costs) ÷ costs × 100% — (benefits - costs) ÷ costs × 100%
Step-by-Step Guide
- 1Total project costs (labor, materials, overhead)
- 2Quantify benefits (revenue increase, cost reduction, time savings)
- 3Calculate: ROI = (benefits - costs) ÷ costs × 100%
- 4Include payback period and NPV
Worked Examples
Input
$100k invest
Result
150% ROI
Common Mistakes to Avoid
- ✕Only counting direct costs, ignoring overhead
- ✕Overestimating benefits or underestimating duration
Frequently Asked Questions
What ROI should projects exceed?
Minimum 15-20%; most companies require 30%+ for approval; strategic projects may accept lower ROI.
How do I quantify intangible benefits?
Risk reduction, improved customer satisfaction, employee morale: estimate in financial terms or document separately.
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