ROI (Return On Investment)

Return on Investment (ROI) describes how much profit is generated from capital invested—and thus shows whether an investment actually “pays off.” Unlike many abstract metrics, ROI translates economic success into an easy-to-understand ratio.

Essentially, ROI shows how efficiently money works: If a small investment generates a large return, the ROI increases—if the profit remains low, the ROI is correspondingly lower.

Formula:
ROI = (Profit / Capital Invested) × 100

Practical example:
A company invests €20,000 in a Warehouse Management System (WMS). Through more efficient warehouse processes, reduced error rates, and lower personnel costs, the company saves approximately €8,000 annually.

Year 1: ROI = 40%
Year 2: Cumulative savings = €16,000 → ROI = 80%
Year 3: Cumulative savings = €24,000 → ROI = 120%

The payback period is therefore approximately 2.5 years—from this point on, the system generates real financial value.

Why ROI is important:
ROI is one of the most important metrics in a company because it allows for the comparison of investments—whether it’s a marketing campaign, the purchase of machinery, or a new product.