Marketing ROI Explained for Small Businesses
Imagine spending $1,000 on ads and not knowing if you made $100 back or $10,000. That’s the reality for many small business owners running campaigns without tracking ROI.
Marketing ROI (return on investment) is the compass that shows whether your marketing is actually making money or just draining your budget. For small businesses, where every dollar matters, understanding ROI isn’t optional. It’s survival.
(For more context on how budgets and ROI go hand in hand, see our guide on Marketing Budget Benchmarks).
In this blog post, we’ll clearly explain what ROI means, how to measure it, and how you can practically use it to ensure you’re making money on your marketing.
What Is Marketing ROI?
At its simplest, marketing ROI measures how much revenue your marketing generates compared to what it costs. It tells you if your efforts are profitable or wasting resources.
According to Salesforce’s ROI Guide, ROI is critical because it helps allocate budgets, justify marketing spend, and evaluate performance against benchmarks.
Other Common Questions About Marketing ROI
In addition to what it is, there are several commonly asked questions when it comes to the topic of marketing ROI.
What does ROI mean in marketing?
Marketing ROI is the measure of what you get back from every dollar you spend. If you put $100 into ads and make $400 in sales directly from that campaign, your ROI is 300%. In plain terms, it’s the scorecard that shows whether your marketing is working or wasting money.
Why is ROI important in marketing?
ROI is important because it connects your marketing activities to real business results. Without it, you might celebrate likes, clicks, or views that look good but don’t actually drive revenue. ROI helps you answer the big question every small business owner has: “Did this campaign actually make us money?”
As Harvard Business Review notes, ROI sets the performance standard—it’s the common language you can use with your accountant, your partners, or your investors to show that marketing is pulling its weight.
What hidden costs affect ROI?
One mistake small business owners make is underestimating costs. ROI isn’t just about the ad spend you see on your credit card bill. It also includes things like:
Your time (or your team’s time) to run the campaign.
Software or tools needed to create and manage ads.
Creative costs like design, photography, or copywriting.
Ignoring these can make your ROI look inflated.
The Marketing ROI Formula (Explained Simply)
Here’s the basic formula:
ROI = (Revenue from marketing – Marketing cost) ÷ Marketing cost × 100
For greater accuracy, subtract organic sales growth that wasn’t driven by marketing:
ROI = (Sales Growth – Organic Sales Growth – Marketing Cost) ÷ Marketing Cost × 100
As Investopedia explains, ROI reveals the efficiency of your investment. Adjustments can be made for factors like gross profit, net profit, or customer lifetime value.
Want to skip the math? Use our free Marketing ROI Calculator.
How to Calculate ROI in Practice
Let’s take a local bakery example:
They spend $500 on Facebook ads promoting holiday specials.
The ads bring in $2,000 in new sales.
ROI = (2000 – 500) ÷ 500 × 100 = 300%.
That means for every $1 spent, they earned $3 back.
According to Business.com, the process is simple:
Track your spend.
Track your revenue.
Subtract costs.
Divide and multiply by 100.
The method stays the same whether you’re running Google Ads, handing out flyers, or sending an email campaign.
Why ROI Is Important for Small Businesses
ROI does more than show numbers. It:
Directs budget to profitable channels.
Helps defend marketing spend to skeptical partners or investors.
Provides benchmarks for future campaigns.
As Harvard Business Review notes, ROI is a performance standard that guides decision-making. Without it, you’re essentially flying blind.
For more on avoiding costly missteps, see our post on 5 Marketing Mistakes Killing Your Revenue.
Common ROI Mistakes Small Business Owners Make
Here’s where small businesses often go wrong:
Not tracking all costs → forgetting labor, software, or hidden fees.
Chasing vanity metrics → focusing on likes instead of sales.
No clear benchmarks → not knowing what “good” looks like.
Poor attribution → not asking “How did you hear about us?”
Only 36% of marketers feel confident measuring ROI accurately. That’s proof most people are overestimating how well they track it.
What Is a Good ROI in Marketing? (Benchmarks)
So, what’s “good”?
Is 30% ROI good? → It means $1.30 return per $1 spent. Decent, but often too low to sustain a small business.
Is 15% ROI realistic? → Yes, but likely unprofitable after overhead.
Is 80% ROI good? → Better, but still may not cover costs.
Can ROI be 200%? → Yes. That’s often the break-even threshold.
Can ROI be 1000%? → Rare, but possible in exceptional campaigns.
Industry Benchmarks per marketing channel:
Email marketing: $42 return per $1 spent (highest ROI).
SEO: $22 per $1 spent.
Paid search (Google Ads): $2 per $1 spent.
Content marketing: companies with blogs see 13x higher ROI.
Rule of thumb: A 500% ROI ($5 return per $1) is strong.
What Do 20% or 24% ROI Really Mean?
A 20% ROI = $1.20 return per $1 spent.
A 24% ROI = $1.24 return per $1 spent.
While these aren’t “bad,” they’re often too low for small businesses with overhead and staff costs. Most need at least 200% ROI to break even.
How to Track ROI on a Budget
You don’t need enterprise software. Start small with:
Google Analytics (free).
CRM dashboards.
Spreadsheets.
Simple promo codes or landing pages.
Try our free ROI Calculator.
High ROI Marketing Tactics for Small Business
According to Salesforce, the highest ROI channels are:
Email marketing
Referral programs
Local SEO (Google Business Profile)
Customer reviews/testimonials
But which marketing has the highest ROI? The answer might surprise you. But consistently, it’s email marketing.
For more, see Marketing Budget Benchmarks.
Low-Cost Marketing with High ROI
If your budget is tight, try:
Partnerships with local businesses.
User-generated content campaigns.
Posting regular, helpful social content.
Building a strong Google Business Profile.
The lesson? Consistency beats complexity.
Steps to Measure and Improve ROI
Here’s a quick checklist:
Define your goals.
Track all costs (ads, tools, labor).
Measure revenue.
Compare to industry benchmarks.
Double down on what works.
Conclusion
ROI isn’t just a number—it’s your roadmap for smarter marketing decisions. For small businesses, understanding and tracking ROI means you know which efforts fuel growth and which waste money.
Start simple: pick one channel, track costs and revenue, and calculate ROI. Then compare against benchmarks and adjust.
Ready to see your numbers? Use our Marketing ROI Calculator today, or book a free ROI audit with our team.