ROI

Header

ROI

ND036 C1 L2 12 ROI

ROI Example

Example Problem A

Cost: $5
Impact: $18
Time period: 3 years

ROI = (impact - cost) / cost
ROI = ($18 - $5) / $5
ROI = $13 / $5
ROI = 2.6 or 260%

Payback period = Cost / (Impact / Time)
Payback period = $5 / ($18 / 3 years)
Payback period = $5 / $6 per year
Payback period = ⅚ years or 10 months

Recap

ROI is a way to measure the efficiency of an investment (like deciding to build a new product or feature). Understanding and calculating ROI for different problems will help you to understand where to focus your team’s time in order to have the biggest impact.

roi image

ROI is the ratio between the return and investment

roi quiz

Use the information in this table to answer the quizzes below

QUIZ QUESTION::

Using the data in the table above., match each problem to its ROI

ANSWER CHOICES:

Problem	ROI
A
B
C
D

SOLUTION:

Problem	ROI
A
B
D
C

payback period quiz

SOLUTION:

A

Summary

Calculating ROI and payback periods are two important tools to help you understand if it makes sense to solve a problem. Projects with positive ROIs will cover the investment required to build the product… Projects with negative ROIs will not and won’t make sense to pursue. Calculating the payback period allows you to understand how long it will take before the product recoups the upfront investment required to build it.