What is a good ROI for a business investment in the UK?

A good ROI depends on the type of investment and the risk involved. For a UK business investment with moderate risk, an annualised ROI of 15 to 25 percent is generally considered good. Marketing investments often target a 3 to 5 times return (300 to 500% ROI) over 12 months. UK commercial property typically delivers 6 to 12 percent total return (combining yield and capital growth). Low-risk investments such as UK government gilts currently yield around 4 to 5 percent. The key is to compare the ROI against the risk and the opportunity cost of the capital.

ROI Calculator UK

Q: How do you calculate ROI?

ROI (Return on Investment) is calculated as: ROI = (Final Value minus Initial Investment) divided by Initial Investment, multiplied by 100. For example, if you invest £10,000 and receive back £14,500 after three years, your total ROI is (£14,500 minus £10,000) divided by £10,000 multiplied by 100 = 45%. To find the annualised ROI (CAGR), use: Annualised ROI = ((Final Value divided by Initial Investment) to the power of (1 divided by years) minus 1) multiplied by 100. For the same example: (£14,500 divided by £10,000) to the power of (1 divided by 3) minus 1 = 13.2% per year.

Q: How do you calculate marketing ROI?

Marketing ROI is calculated as: Marketing ROI = (Revenue attributed to marketing minus Marketing Cost) divided by Marketing Cost, multiplied by 100. Some marketers use gross profit instead of revenue in the numerator to avoid overstating the return. For example, if you spend £5,000 on a Google Ads campaign and generate £22,000 in attributed revenue with a 50% gross margin (£11,000 gross profit), your marketing ROI on gross profit is (£11,000 minus £5,000) divided by £5,000 multiplied by 100 = 120%. A marketing ROI above 100% (i.e. more than 2x gross profit return on spend) is generally considered positive for a UK business.

Q: How is property ROI calculated in the UK?

UK property ROI combines rental yield and capital growth. Gross rental yield = Annual Rent divided by Purchase Price multiplied by 100. Net rental yield = (Annual Rent minus Annual Expenses) divided by Purchase Price multiplied by 100. Total ROI including capital growth = ((Final Value minus Purchase Price) plus Net Rental Income) divided by Purchase Price multiplied by 100, annualised over the holding period. For a buy-to-let with a £250,000 purchase price, £12,000 annual rent, £3,000 expenses, and 4% annual capital growth over 5 years, the net yield is 3.6% and the total annualised return including capital growth would be approximately 7.6%.

Q: What is the difference between ROI and annualised ROI (CAGR)?

Total ROI is the simple percentage gain over the entire investment period, regardless of how long it took. Annualised ROI (also called CAGR, Compound Annual Growth Rate) converts the total ROI into an equivalent annual rate, making it easier to compare investments of different durations. A 45% total ROI over 3 years equates to a 13.2% annualised ROI. A 45% ROI over 10 years equates to only 3.8% annualised. The annualised figure is almost always more useful for comparing investment opportunities, because a high total ROI achieved over many years may be less attractive than a lower total ROI achieved quickly.

Q: What limitations does ROI have as a metric?

ROI has several important limitations. It does not account for the time value of money (a pound received today is worth more than a pound received in five years), which is why NPV (Net Present Value) and IRR (Internal Rate of Return) are preferred for longer-term investments. ROI does not capture risk; two investments with the same ROI but very different risk profiles are not equally attractive. Attribution is often difficult, particularly for marketing ROI, where multiple channels contribute to a single conversion. Finally, ROI is a backward-looking metric when used historically and a forward-looking estimate when used for decision-making, so the quality of the underlying assumptions matters enormously.

Calculate return on investment for any business investment, marketing spend, or UK property. Get total ROI, annualised ROI (CAGR), profit/loss in pounds, and payback period. Three modes: standard investment, marketing ROI, and property ROI.

Initial Investment (£)

Final Value (£)

Time Period (years)

Annual Return / Income (£, optional) Enter if investment generates ongoing income

Ad / Marketing Spend (£)

Attributed Revenue (£)

Gross Margin (%) Used to calculate profit-based ROI

Customers Acquired (optional)

Purchase Price (£)

Annual Rental Income (£)

Annual Expenses (£) Management fees, maintenance, insurance, voids

Annual Capital Growth (%)

Holding Period (years)

How to Calculate ROI: The Fundamentals

Return on Investment (ROI) is one of the most widely used financial metrics in business, and for good reason. It translates any investment decision into a common percentage language that allows direct comparison across very different types of investment. Whether you are evaluating a new piece of equipment, a marketing campaign, a staff training programme, or a buy-to-let property, ROI gives you a single number that represents the efficiency of that investment relative to its cost.

The basic ROI formula is: ROI (%) = (Return − Investment Cost) ÷ Investment Cost × 100. Where Return is the total value received (final value of an asset, total income generated, or total revenue attributed to the investment). A positive ROI means the investment generated more than it cost. A negative ROI means it made a loss. An ROI of 0% means you got back exactly what you put in with no gain or loss.

Total ROI vs Annualised ROI (CAGR)

Total ROI tells you the overall percentage gain, but it does not account for how long the investment took. A 100% ROI sounds excellent, but if it took 20 years to achieve, the annualised return is only 3.5% per year, which is less than the current UK base rate. Annualised ROI, also known as CAGR (Compound Annual Growth Rate), converts the total return into an equivalent annual rate: Annualised ROI = ((Final Value ÷ Initial Investment) ^ (1 ÷ Years)) − 1 × 100.

For UK investors, the annualised ROI is the most useful comparison tool. It allows you to compare the return from a business investment against the return you could have achieved by leaving the money in a savings account, buying UK government gilts, or investing in a FTSE 100 index fund. The historical long-term annualised return from UK equities (FTSE All-Share) is approximately 8 to 10% per year including dividends, which provides a useful benchmark for business investment decisions.

Payback Period: How Quickly Does the Investment Recover?

The payback period is the length of time it takes for an investment to generate cumulative returns equal to the initial cost. For simple investments with regular annual income, payback period = Initial Investment ÷ Annual Return. For a £50,000 investment generating £10,000 per year, the payback period is 5 years.

UK businesses typically use payback period as a risk management tool alongside ROI. The shorter the payback period, the sooner the capital is recovered and the lower the risk that an unexpected event (market downturn, technology change, competitor disruption) will result in a loss. For capital expenditure on manufacturing equipment, payback periods of 2 to 4 years are common targets. For technology investments and software, businesses often accept shorter payback periods of 12 to 24 months, reflecting the faster pace of change in the sector.

Marketing ROI: Measuring the Return on Ad Spend

Marketing ROI is calculated differently from standard investment ROI because the relationship between spend and revenue is rarely direct. Attribution is complex: a customer may see a Google ad, visit the website twice over several weeks, receive an email, and then convert through an organic search. Deciding which channel gets credit for the sale (and therefore how to calculate the ROI for each) is one of the central challenges of modern marketing analytics.

The most common marketing ROI formulas are: Revenue-based marketing ROI = (Attributed Revenue − Ad Spend) ÷ Ad Spend × 100, and the more conservative Profit-based marketing ROI = (Attributed Gross Profit − Ad Spend) ÷ Ad Spend × 100. The profit-based formula is more accurate for business decision-making because it accounts for the cost of the goods or services sold, not just the revenue received. A marketing channel that generates £10 of revenue per £1 of ad spend (1,000% revenue ROI) may only be delivering £2 of gross profit per £1 of spend (100% profit ROI), which is far less impressive.

For UK businesses, the cost per acquisition (CPA) is equally important alongside ROI. CPA = Total Ad Spend ÷ Number of Customers Acquired. Combined with customer lifetime value (LTV), CPA allows you to assess whether the ROI of a marketing channel is sustainable at scale. If your LTV is £500 and your CPA is £50, you have a 10:1 LTV:CPA ratio, which is generally considered excellent. Most UK digital marketing agencies target a minimum LTV:CPA ratio of 3:1.

Property ROI: Buy-to-Let and Commercial Property

UK property ROI has two components: rental yield and capital growth. Gross rental yield = Annual Rent ÷ Purchase Price × 100. Net rental yield = (Annual Rent − Annual Expenses) ÷ Purchase Price × 100. Annual expenses typically include: letting agent management fees (8 to 15% of rent), buildings insurance (£200 to £600 per year), maintenance and repairs (1 to 2% of property value per year), void periods (typically 4 to 6 weeks per year for budgeting purposes), and landlord safety certificates and licensing fees.

Capital growth for UK residential property has historically averaged around 4 to 5% per year nationally, with significant regional variation. London and the South East have seen higher growth historically but are also more exposed to market corrections. The North West, Yorkshire, and East Midlands have shown stronger yield-adjusted returns in recent years due to lower entry prices. When calculating property ROI, it is important to also account for the significant transaction costs involved: Stamp Duty Land Tax (currently with a 3% surcharge on additional properties), legal fees, survey costs, and mortgage arrangement fees can add 5 to 8% to the effective purchase price and substantially reduce the first-year ROI.

Net Present Value (NPV): Going Beyond Simple ROI

Simple ROI does not account for the time value of money. A pound received in five years is worth less than a pound received today, because today's pound can be invested and generate returns in the intervening period. Net Present Value (NPV) corrects for this by discounting future cash flows back to today's value using a chosen discount rate (typically the cost of capital or a required rate of return). NPV = Sum of (Cash Flow in Year t ÷ (1 + Discount Rate)^t) − Initial Investment. A positive NPV means the investment adds value above the required return; a negative NPV means it destroys value even if the simple ROI is positive.

For UK businesses evaluating capital investment decisions, NPV is generally preferred over simple ROI for any investment with a time horizon of more than two years. The Internal Rate of Return (IRR) is the discount rate at which the NPV equals zero, and it represents the effective annualised rate of return that equates all future cash flows to the initial investment. If the IRR exceeds the cost of capital (or a chosen hurdle rate), the investment is considered financially viable.

Common ROI Mistakes Made by UK Businesses

The most frequent error in ROI calculations is using revenue rather than profit to assess marketing or sales investments. Revenue ROI will always be higher than profit ROI and will overstate the actual return. A related error is failing to include all costs: for a marketing campaign, this means including not just the media spend but also the agency fees, creative production costs, and the internal staff time spent managing the campaign.

For capital investments, a common error is using an optimistic estimate of future returns without applying any probability weighting or sensitivity analysis. Running a best-case, base-case, and worst-case scenario gives a more realistic picture of the investment's risk-adjusted return. UK businesses that make investment decisions based solely on best-case ROI projections frequently find that actual returns fall short, particularly when factors such as implementation delays, user adoption challenges, and unexpected additional costs are not accounted for.

Frequently Asked Questions

How do you calculate ROI?

ROI = (Final Value − Initial Investment) ÷ Initial Investment × 100. Annualised ROI (CAGR) = ((Final Value ÷ Initial Investment) ^ (1 ÷ Years) − 1) × 100. Our calculator handles both automatically.

What is a good ROI for a UK business investment?

For business investments with moderate risk, an annualised ROI of 15–25% is generally considered strong. Marketing investments often target 3–5x return on gross profit. UK equities have historically returned 8–10% annualised including dividends, providing a useful opportunity cost benchmark.

What is the payback period and how is it calculated?

Payback period = Initial Investment ÷ Annual Return. It shows how long until the original outlay is recovered. UK businesses typically require 2–5 years for capital equipment. Shorter payback periods indicate lower risk.

How do you calculate marketing ROI?

Marketing ROI = (Attributed Revenue − Ad Spend) ÷ Ad Spend × 100. For a more accurate result, use gross profit rather than revenue in the numerator. A profit-based marketing ROI above 100% (2x return on gross profit) is generally considered positive.

How is property ROI calculated in the UK?

Net rental yield = (Annual Rent − Expenses) ÷ Purchase Price × 100. Total ROI = (Capital Gain + Net Rental Income) ÷ Purchase Price × 100, annualised. Remember to include Stamp Duty (with 3% surcharge for additional properties), legal fees, and survey costs when calculating the effective cost of acquisition.

What is the difference between ROI and annualised ROI (CAGR)?

Total ROI is the overall percentage gain regardless of time. Annualised ROI converts it to an equivalent per-year rate for easy comparison. A 45% total ROI over 3 years = 13.2% annualised. Over 10 years, the same 45% total ROI = only 3.8% annualised.

What limitations does ROI have as a metric?

ROI does not account for the time value of money (use NPV for longer-horizon investments), does not capture risk, and can be misleading when attribution is difficult (particularly for marketing). It is also a single-point estimate; always run sensitivity analysis with best, base, and worst case scenarios for important decisions.

Author: Mustafa Bilgic (MB), UK Business Finance Specialist • Last updated: February 2026 • Figures are for guidance only. Property tax, Stamp Duty rates, and investment returns are subject to change.