Generating ROI, or return on investment, comes down to two levers: increasing the gains from what you put money into, or reducing the costs associated with it. That sounds simple, but the practical work of improving returns varies significantly depending on whether you’re running a business, investing in property, spending on marketing, or deploying capital elsewhere. The strategies below cover how to measure ROI accurately and then improve it across the most common categories where people seek better returns.
How ROI Is Calculated
Before you can generate better ROI, you need to measure it correctly. The basic formula is straightforward: subtract the total cost of the investment from the net gain, divide by the total cost, and multiply by 100 to get a percentage. If you spent $10,000 on a project and it produced $13,000 in value, your ROI is 30%.
The tricky part is defining “total cost” honestly. ROI figures get inflated when you leave out expenses that are easy to overlook. For a stock trade, total cost includes brokerage commissions, not just the purchase price. For a real estate investment, it includes mortgage interest, property taxes, insurance, and maintenance. For a business initiative, it includes employee time, software subscriptions, and overhead allocated to the project. If you calculate ROI using only the most obvious expense line, you’ll overestimate your returns and make worse decisions going forward.
A useful habit: before calculating ROI on anything, list every cost category first. Include direct costs (what you paid for the asset or campaign), indirect costs (staff time, tools, utilities), and transaction costs (fees, commissions, taxes). Then calculate. This gives you a number you can actually trust and improve upon.
Generating ROI From Marketing Spend
Marketing is one of the most common areas where businesses try to improve returns, and it’s also one of the easiest to waste money on. The core principle is to spend more on what works and less on what doesn’t, but executing that requires a few specific practices.
Segment your audience. Broad campaigns that target everyone tend to convert poorly. Value-based segmentation, where you tailor messaging and offers to distinct customer groups based on their purchasing behavior, makes your budget go further. A $5,000 campaign aimed at 500 high-intent buyers will almost always outperform a $5,000 campaign blasted to 50,000 random contacts.
Optimize by channel. Use analytics to identify which channels (email, paid search, social media, direct mail) actually drive conversions for your specific business. Then shift budget toward the top performers. Many businesses spread marketing dollars evenly across channels out of habit rather than data, which drags down overall ROI.
Use predictive modeling when possible. If you have enough customer data, predictive tools can forecast future purchase behavior, letting you target customers who are likely to buy soon rather than waiting for them to signal intent. This shifts your marketing from reactive to proactive, which typically produces higher conversion rates per dollar spent.
Invest in customer retention. Acquiring a new customer almost always costs more than keeping an existing one. Loyalty programs, consistent customer experiences across touchpoints, and recognition programs that reward repeat purchases all deepen retention. In SaaS businesses, for example, top-performing companies aim for net revenue retention rates above 100%, meaning existing customers spend more over time than what’s lost to churn. That kind of retention dramatically improves ROI on your original acquisition cost.
Generating ROI From Real Estate
Real estate ROI comes from two sources: income (rent) and appreciation (the property increasing in value). You can improve both through strategic upgrades and cost management.
On the income side, improvements that increase a property’s desirability tend to justify higher rents and reduce vacancy. This doesn’t always mean expensive renovations. Smart technology like programmable thermostats, keyless entry, and energy-efficient lighting can lower operating costs while making the property more attractive to tenants. The key is choosing upgrades that cost less to install than the additional income they generate over a reasonable timeframe.
On the cost side, take a close look at every recurring expense: debt payments, property management fees, insurance premiums, and maintenance contracts. Hiring a more efficient property management team, or renegotiating vendor contracts, directly increases your net income without requiring any additional revenue. If interest rates have dropped since you purchased, refinancing your mortgage can lower your annual debt service and improve ROI immediately.
The biggest mistake in real estate ROI calculations is ignoring the full cost picture. A property might look like it produces a 12% return if you only count the purchase price and rental income. Factor in mortgage interest, taxes, insurance, and the $8,000 roof repair you didn’t expect, and the real number might be closer to 5%. Tracking every dollar out gives you an honest baseline to improve from.
Generating ROI in a Business
For business owners, ROI isn’t limited to financial investments. Every major decision, from hiring a new employee to purchasing equipment to launching a product line, has a return profile you can evaluate and improve.
Measure before you scale. Run small tests before committing large budgets. If you’re considering a new sales channel, invest a modest amount to validate demand before building out infrastructure. This limits downside risk and gives you real performance data to project ROI at scale.
Reduce time-to-value. The faster an investment starts producing returns, the higher its annualized ROI. If a new hire takes six months to become productive instead of three, that’s three extra months of cost with no return. Structured onboarding, better training, and clearer role expectations can compress that timeline.
Cut hidden costs aggressively. Software subscriptions that nobody uses, redundant vendor relationships, and inefficient processes all erode ROI. Conduct a quarterly audit of recurring expenses and ask whether each one contributes to revenue or cost savings. Many businesses find 10% to 15% of their operating budget is going toward tools or services that no longer serve a purpose.
Focus on high-margin activities. Not all revenue is equally profitable. If one product line generates 40% margins and another generates 8%, shifting resources toward the higher-margin line will improve overall business ROI even if total revenue stays flat. Analyze profitability at the product, service, or customer level rather than looking only at top-line growth.
Annualized ROI for Comparing Options
A common problem when comparing investments is that raw ROI percentages don’t account for time. A 50% return over five years is not the same as a 50% return over one year. To compare options fairly, convert to annualized ROI, which shows the equivalent yearly return.
The simplest approach: divide the total ROI by the number of years the investment was held. A more precise method uses compound annual growth rate (CAGR), which accounts for the effect of compounding. If you invested $10,000 and it grew to $16,000 over four years, your total ROI is 60%, but your annualized return is roughly 12.5% per year. This makes it possible to compare that investment against, say, a marketing campaign that returned 25% in six months (annualized to about 50%) and make an informed decision about where your next dollar should go.
Setting a Realistic ROI Target
What counts as “good” ROI depends entirely on context. A diversified stock portfolio might target 7% to 10% annually. A real estate investment might aim for 8% to 12% after all expenses. A marketing campaign might need to return 3x to 5x its cost to be considered successful, depending on industry and margins.
For businesses, particularly in software, growth benchmarks can help set expectations. High-performing SaaS companies, for instance, target annual revenue growth around 26% or higher. If growth is slower, the focus shifts to operational efficiency, proving you can generate strong returns on every dollar spent rather than relying on top-line expansion to drive ROI.
The most useful ROI target is one that accounts for your actual cost of capital. If you’re borrowing at 7% interest to fund an investment, anything below 7% ROI means you’re losing money in real terms. Your target should clear your cost of capital by enough margin to justify the risk and effort involved.