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Software ROI Calculator

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What is software ROI?

Software Return on Investment (ROI) measures the benefits of implementing a software solution compared to its associated costs. Calculating your software ROI can help you assess if implementing a software application results in expected value addition in terms of cost savings, increased revenue, or improved productivity.

Relevant channels: SaaS tools, enterprise software, marketing automation solutions, customer relationship management (CRM), and accounting software.

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How to use this software ROI calculator

To calculate your software ROI, enter your cost savings, increase in revenue, average monthly salary, total time saved, and the costs associated with purchasing, implementing, training, and maintaining the software. The calculator will instantly calculate your software ROI, indicating whether your investment yields a positive return.

Software ROI formula

An image showing software ROI formula

Software ROI = (Net Benefit from Software – Software Cost) / Software Cost × 100

Here,

Value of Improved Productivity = (Total Time Saved × Average Monthly Salary) / Monthly Working Hours

Net Benefit from Software = Cost Savings + Increased Revenue + Value of Improved Productivity

Software Cost = Software Purchase/Subscription Cost + Implementation Costs + Training Costs + Maintenance Costs

Understanding the software ROI result

Your software ROI will be influenced by various factors such as the type of software, your industry, scale of business, etc. In general,

  • A high software ROI means that the software has significantly increased revenue, reduced costs, or boosted productivity, making it a worthwhile investment.

  • A low or negative software ROI implies that the costs of acquiring and maintaining the software exceed the benefits, suggesting it may not be an efficient investment or may require re-evaluation.

When to calculate software ROI

  • After implementing a new software tool to measure its financial impact

  • Before investing in new software to predict potential returns

  • To compare different software solutions and choose the best ROI

  • For budgeting purposes, to justify continued investment in a specific software

How to calculate software ROI (with example)

Let’s assume your company invests in a software tool with the following details:

Cost Savings: $20,000

Increased Revenue: $50,000

Average Monthly Salary: $5,000

Total Time Saved: 300 hours

Monthly Working Hours: 160 hours

Software Purchase/Subscription Cost: $10,000

Implementation Costs: $5,000

Training Costs: $2,000

Maintenance Costs: $3,000

You can calculate your software ROI as follows:

Software ROI = (Net Benefit from Software – Software Cost) / Software Cost × 100

Value of Improved Productivity = (300 × 5,000) / 160 = $9,375

Net Benefit from Software = 20,000 + 50,000 + 9,375 = $79,375

Software Cost = 10,000 + 5,000 + 2,000 + 3,000 = $20,000

Software ROI = (79,375 – 20,000) / 20,000 × 100 = 296.88%

In this example, the software ROI is 296.88%, meaning for every $1 spent, you earned almost $3 in return.

How to improve your software ROI

  • Ensure you fully utilize the software's features to maximize cost savings and efficiency gains.

  • Train your team effectively to reduce onboarding time and boost productivity quickly.

  • Negotiate better pricing terms with vendors to reduce your software subscription and maintenance costs.

  • Automate repetitive tasks using the software to save even more time and labor costs.

  • Regularly review and optimize your software usage to identify areas for additional savings or revenue generation.

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