How to Calculate Marketing Return on Investment

Understanding your Marketing Return on Investment (ROI) is the difference between guessing if your business is growing and actually knowing it. Without this number, you’re essentially throwing money into a black hole and hoping for the best—and as a Brisbane business owner, you likely have better things to do with your hard-earned cash.

Calculating ROI allows you to see exactly which campaigns are driving revenue and which ones are just noise. Whether you’re running Facebook ads for a café in Fortitude Valley or doing SEO for a national trade service, this guide will help you find your real numbers.

What you’ll need before we start

• Total Marketing Spend: Every cent you spent on the campaign (ad spend, agency fees, creative costs).
• Sales Data: Total revenue generated specifically from those marketing efforts.
• Cost of Goods Sold (COGS): How much it costs you to actually deliver the product or service (optional, but highly recommended for accuracy).
• A calculator or a simple Excel/Google Sheet.

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Step 1: Define your tracking window

Before you crunch any numbers, you need to decide the time period you’re looking at. Are you measuring a single EOFY sale or your total marketing performance for the last quarter?

Step 2: Calculate your total marketing cost

This is where most people get stuck, and honestly, the interface of platforms like Meta or Google doesn't help because they only show you "Ad Spend." To get a true ROI, you need to include the "hidden" costs.

• Ad Spend: What you paid directly to Google, Facebook, or LinkedIn.
• Software/Tools: Any subscriptions like Mailchimp or Canva used for the campaign.
• Labour/Agency Fees: If you pay an agency like us or a freelancer, include that fee here. If you’re doing it yourself, technically your time has a cost too, but for now, let’s stick to out-of-pocket expenses.

Step 3: Determine your Gross Profit (The "Real" Number)

This is the part where the math gets a bit fiddly, but it’s the most important step. If you sell a product for $100, you didn't actually "make" $100. You had to buy the stock, pay for shipping, and cover merchant fees (like Square or Stripe).

If you skip this step, your ROI will look much better than it actually is, which can lead to some very dangerous financial decisions. (You can always change this later if you just want a quick 'top-line' view, so don't overthink it for your first try).

Step 4: The Basic ROI Formula

Now, let’s put it all together. The standard formula used by marketers worldwide is:

Let’s look at a real-world example for a Brisbane-based landscaping business:

• Revenue from Ads: $10,000
• Marketing Cost: $2,000
• Calculation: ($10,000 - $2,000) / $2,000 = 4
• Percentage: 4 x 100 = 400% ROI.

In plain English: For every $1 you spent, you got $4 back in profit (before other overheads).

Step 5: Account for the "Sales Cycle" lag

This is a very Australian context: we often have longer decision-making cycles for high-ticket items. If you’re a solar installer or a lawyer, someone might click an ad in January but not pay you until March.

Step 6: Setting your Benchmarks

What is a "good" ROI? Honestly, it depends.

• 5:1 Ratio (500%): This is considered strong for most industries.
• 10:1 Ratio (1,000%): You’re absolutely crushing it. Scale up immediately!
• 2:1 Ratio (200%): You’re likely just breaking even once you account for your rent, staff, and tax (GST/BAS).

Common Mistakes to Avoid

• Ignoring GST: Ensure you are being consistent. Either include GST in both your costs and revenue or exclude it from both. Mixing them will give you an inaccurate 10% swing.
• Vanity Metrics: Don't confuse ROI with 'Reach' or 'Likes'. You can't pay your Brisbane City Council rates with 'Likes'. Focus on the dollars.
• The "Attribution" Trap: Sometimes a customer sees a Facebook ad, then searches for you on Google, then calls you. Which one gets the credit? Don't get bogged down in the tech—look at your total marketing spend vs. total new business growth.

Troubleshooting

• "My ROI is negative!" – Don't panic. Is the campaign new? It often takes 3 months for Google's AI to learn who your customers are. If it's been 6 months and it's still negative, it’s time to change your creative or your offer.
• "I can't tell where my leads came from." – This is the most common issue. Start using a simple "How did you hear about us?" field on your website contact form or ask over the phone. It’s not 100% accurate, but it’s better than flying blind.
• "The data in Google Analytics doesn't match my bank account." – It never will. Privacy settings (like iOS14) block a lot of tracking. Always trust your bank account and CRM over what a dashboard tells you.

Next Steps

Now that you know your numbers, it's time to trim the fat. Look at your different channels (SEO, Social, Email) and compare their ROIs. Move your budget from the lowest performers to the highest.

If you're struggling to track where your leads are coming from, or your ROI isn't where it needs to be, we can help you set up professional tracking systems.