Project Return on Investment (ROI) is a ratio which compares the net benefits (profits) earned by a project against total costs incurred by this project to an organization. It is used by organizations to evaluate the efficiency of an investment made into a project: to calculate if its worth is equal to the worth of outputs obtained. The benefit (gain or return) of an investment is divided by the cost of the investment, so the result is expressed as a percentage (or a ratio). Project ROI is considered for a period of time, so you can determine so called “payback period” – an amount of time you need to reach and surpass the money invested: the project becomes profitable starting from this point.
Project ROI is used by project stakeholders to derive if the project is worth of investment (including money, time, efforts and other resources). ROI calculation is used, along with other approaches, to develop a business case for a specific proposal. The goal is always to maximize return on the money you invest. Basically, the formula to calculate Project ROI is the following:
ROI = [(Payback - Investment)/Investment)]*100;
Payback is the total amount of profit gained from your investment into a project.
Investment represents the costs of resources involved into producing the given payback.