What Is a Good ROI? (benchmarks for every kind of investment)
"Good" ROI depends entirely on what you invested in, how long the money was tied up, and what else you could have done with it. Here are the benchmarks that actually matter.
The first question: total or annualized?
A 25% ROI sounds great. Over five years, it's only 4.6% annualized — worse than a high-yield savings account. Always quote ROI annualized when comparing investments of different lengths. Total ROI is fine for a single project with a clear endpoint.
Benchmarks by investment type
| Investment | Annualized ROI | Notes |
|---|---|---|
| High-yield savings (2026) | 3–5% | The risk-free baseline. |
| US bonds (10-year Treasury) | ~4% | Low risk, taxable. |
| S&P 500 (long-run avg) | ~10% | With volatility — assume −20% years happen. |
| Residential real estate (leveraged) | 8–12% | Includes appreciation + rental yield. |
| Small business marketing | 200–400% (3–5×) | ROAS, not annualized — campaign-level. |
| New product launch | 20–100% in year 1 | Wildly variable. Many lose money in year 1. |
| Hiring an employee | 3× their cost in revenue | The classic small-business rule of thumb. |
| Software / equipment | Should pay back in 12–18 months | Anything longer needs a strong strategic case. |
Set your own hurdle rate
A "hurdle rate" is the minimum ROI a project needs to clear before you'll do it. The simple version:
- Find your cost of capital — the interest on your business loan, or what a safe investment would earn.
- Add a risk premium of 5–10% for the uncertainty of the project.
- Require new projects to clear that combined number.
For most small businesses that puts the hurdle around 12–18% annualized. Below it, the project isn't worth the risk versus simpler alternatives.
What ROI doesn't capture
- Risk. A 30% ROI on a coin flip isn't better than a 10% ROI on a sure thing.
- Time and effort. A 100% ROI that takes 80 hours of your time may be worse than a 50% ROI on autopilot.
- Strategic value. A break-even project can still be worth doing if it builds a customer base, a skill, or a brand.
- Inflation. A 4% return in a 5% inflation year is a real loss.
Common ROI mistakes
- Counting revenue, not profit. A $1,000 ad campaign that drives $3,000 in revenue is only a winning ROI if your gross margin covers the $1,000 plus the cost of those goods.
- Forgetting your own time. If a side project earns you $10k but takes 200 hours you could've billed at $80, the real ROI is sharply lower.
- Ignoring the "do nothing" alternative. A project that beats zero isn't necessarily good — it has to beat what your money or time would have earned elsewhere.
Frequently asked
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Last updated: 2026-05-14 · Back to all guides