Build an ROI Calculator in 6 Steps

Why an ROI Calculator

A return on investment (ROI) calculator is a great way to land your differentiation and value with customers.

In a sales cycle, an ROI calculator lets your sales people equip your champion at the prospect with a business case to get budget & overcome objections.

Plus every element of an ROI calculator is an opportunity to land positioning and differentiation.

Build an ROI Calculator that Customers Believe

An ROI Calculator is a way to create belief in your claims about the value of your product.

But to create belief, you need to establish trust.

Keys to establishing trust in the ROI Calculator

  • Collaborative – you have to involve your champion in deciding which parts of the value of your product are most important to her company. You also need to let *her* (not you) set the assumptions about improvements she’ll gain from using your product. P.S. These conversations are a great way to help her further convince herself!
  • Transparent – every number and calculation in your ROI calculator has to be transparent about how it was arrived at (show your formulas), and show and let her set the input assumptions, so that she can understand it, tailor it, and advocate/defend it internally
  • Thorough – the core value of the ROI calculator to your champion is that it saves her time and does her thinking/persuasion work for her. Your calculator needs to be more thorough than she could come up with in a few hours

By making the tool and process for filling it out collaborative, transparent and thorough, you’ll earn her trust that she’s steering the ship, that she understands the math(s), and that you’ve been thoughtful about this.

And part of ‘thorough’ is working to include all the different ways your product provides value.

Build Your ROI Calculator: 6-step Process

Here’s the process I’ve come up with over [redacted] years. Open a new spreadsheet and add a label for column B (current approach/incumbent), and put your company’s name in column C.

Now build out your rows, which are your benefits (the R in ROI) and costs (the I in ROI).

I prefer to use annual amounts for everything (the numbers are bigger!), but some prefer monthly. Regardless, pick one and use that for everything.

  1. Add a row for every hard-dollar benefit
    Here we’re talking about things like increased win rates/retention. Cash costs reduced. Note that reduced spend on outside labor is a hard dollar benefit.
  2. Add a row for every soft-dollar benefit (labor hours saved)
    How many hours a year does the customer’s team spend doing the business process your product addresses/automates? Using and maintaining the tools involved? What about IT and data team hours? If your product is easier to use / more automated, this adds up quick. And don’t forget that it will take labor hours to deploy your tool. Account for those as separate rows under each function. Again, annual amounts.

    TIP: To calculate the dollar cost of labor hours, create an input field to generate the burdened cost for each hour of labor (avg salary/2000 hours*1.5)

  3. Add hard costs/investments
    License/subscription fees for your product. Consulting hours they’ll have to pay for to deploy and integrate your product. Support package they’ll have to pay for. Integration app license fees. Usage fees of any kind. Both for you and the incumbent/competitor. This will highlight the overall lower costs of a single platform, if that’s your play.
  4. Rough-test it with sample data to fill in the gaps
    Start plugging in values in columns B and C for a notional customer. Doesn’t need to be from a real customer (though that helps), but it needs to be reasonable.

    This is where you’ll be inserting a lot of rows. As you fill in each number, ask yourself “how did i get to that?” Increased ACV from higher win rates? Well then you’ll need to add rows for: current ACV & % lift in win rate, and then make the ‘Increased ACV from Higher Win Rates’ field into a formula that multiplies those two inputs. I like to highlight all input boxes in pale yellow, and lay out formulas in words in column D, in dark gray italics.
  5. Get feedback
    Here, your sales/SE and CSM teams are your best friends. Have them poke holes, add other value points they talk about. Role play with you as the AE and them as the customer filling it out. You’ll find they’ve thought of things you haven’t, and you’ll identify things you’ve included that stretch belief too far (remove these). And the feedback process will also help you refine the layout and usability of the tool.
  6. Create an Exec Summary
    Through all of the buildout, you may wind up with something that’s really detailed, 50 or 60 rows. If this is the case, add a new worksheet in the very front of your spreadsheet that has all of the input boxes and their labels (on the left), and the high-level summary of ROI on the right. High-level summary might be rows for each of total hard-dollar improvements, labor hour savings, and costs – both incumbent and you.

Putting ROI Calculators to work

Once you’ve got something you like, take it to one-on-one conversations with a handful of friendly customers. 

You’ll be asking them to poke holes in it, think about where it matches up to their experience, and what they think the default values should be that you put alongside each field as helper text for your AEs and champions when you roll out the tool.

For rollout to sales, do hands-on workshops where trios of sales people fill it out for a real current opportunity.

Coda: A note about Marketing ROI Calculators

All of the above is talking about ROI calculators used by your sales team and their champions.

But some companies get an urge to put an ROI calculator on the website as a bottom-of-funnel offer. That’s great.

But do the sales version first and get it some use so you identify improvements and refine the model. If it’s working great after that, then making a more digestible version for marketing is a smart experiment (and often a high-conversion offer).

Happy selling!

From the front porch in Moss Beach,

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