ROMI

ROMI, return on marketing investment, tells you whether the money you put into advertising came back with a profit. It shows how much profit advertising brought beyond what it cost. At 0% the advertising only paid for itself. Above zero it earned more than it cost; below zero it lost money.

The formula has two parts. Advertising is the spend for the period, from the ad accounts or invoices. Profit from deals is the profit on won deals whose inquiry came from that advertising, which is why every inquiry in the CRM needs a channel field. Subtract advertising from profit, then divide by advertising. Example (invented numbers): in the worked example, $600 is advertising and $1,800 is the profit on the deals it brought, so the advertising returned its cost and twice as much on top.

Use the same period for profit and for advertising.

Advertising $600, profit from deals $1,800: ($1,800 - $600) ÷ $600 = 200%.

Calculate ROMI monthly or per campaign, once the deals from that advertising have had time to close. The owner, whoever runs advertising and the head of sales read it together. Split it by channel: one number for all advertising hides the channels that lose money.

It moves the ad budget. Add money where ROMI stays above zero and cut where it stays below. Give a new channel at least one sales cycle before you judge it, or you will judge it before its deals close.

ROMI runs on profit, which is why profit per deal is part of it. Cost per inquiry shows the price at the start of the path, and CAC adds the work of the sales department.

• Using revenue instead of profit. With revenue every channel looks better. Subtract direct costs first.
• Taking profit and advertising from different periods. Use the same period for both parts. Ads paid for this month may bring deals next month, so write down which months you matched.
• Judging too early. Deals from a new campaign may close one or two sales cycles later. Until then, mark the result as preliminary.
• Counting deals without a channel. If the CRM does not record where the inquiry came from, the profit gets credited to the wrong advertising.

By Friday, whoever runs advertising writes last month's spend by channel. The head of sales lists the same month's won deals by channel from the CRM and adds the profit on each. Calculate ROMI per channel and mark channels younger than one sales cycle as preliminary. Bring the table to the next weekly meeting with the owner. Agree in advance what happens to a channel that stays below zero, say two months in a row, and treat that rule as a test.

Which numbers to check every week, with one definition for the whole team.