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blog | May 13, 2016

How to Calculate the ROI of Your CRM

Evaluating the Return On Investment (ROI) of your Customer Relationship Management (CRM) software is imperative to a successful onboarding process. By digging into the core metrics, you’ll be able...

By WorkWiseSoftware

Evaluating the Return On Investment (ROI) of your Customer Relationship Management (CRM) software is imperative to a successful onboarding process. By digging into the core metrics, you’ll be able to find any weak spots, evaluate what’s working, and look for opportunities to improve upon as your business continues to adapt to the CRM. There are a number of steps to take in order to identify ROI; let’s take a look at the process.

Before Calculating ROI

Understand Your Own Expectations

What were you expecting to get out of your CRM? How much time were you expecting the onboarding process to take? How was the business performing before the CRM implementation? These questions are key to having the right mindset when you evaluate ROI. Without knowing and acknowledging your own expectations for the software transition, it can be difficult to compare the ROI to what you initially had in mind. Lay it all out on the table before you begin your calculations so you can have a clear, transparent comparison for the whole team to see.

Define Important Metrics

Before digging into ROI, it’s necessary to define key metrics that you’re looking to measure. These metrics will vary from business to business. After they’ve been defined, ensure that everyone within the company is in agreement. Typically, discussion will be necessary across departments, such as finance to marketing.

Break Into Hard and Soft Benefits

As with any major investment, there are hard and soft benefits. Examples of hard benefits include revenue and revenue per lead, while soft benefits typically include increase in customer satisfaction and efficiency of the company. When calculating ROI, it’s important to look specifically at the hard benefits, while also keeping in mind the soft benefits once the calculation is complete.

Calculating ROI

Factor in Initial Productivity Loss

Bringing in new software will always bring with it some sort of learning curve. There’s an initial onboarding and training process that will have to take place, requiring that your team gets fully educated on the new CRM software and slowly begins to adapt to the new process. As a result, productivity will likely go down initially. This is a factor that needs to be considered before you go into calculating ROI. If the onboarding process is efficient and smooth, you won’t have to deal with any major productivity or sales losses as a result.

Detail Total Cost of Software Ownership

When adding a CRM, either through a purchase or subscription, there’s almost always an upfront cost. In addition, there are more fees, including any hardware fees, maintenance fees, upgrade fees, or miscellaneous charges. These are all costs that will need to be laid out and understood during the evaluation process for ROI.

Has Revenue Changed?

To begin, measure the overall revenue of your company from the period (6 months, 1 year) before the CRM implementation to now. Understand that the first month or so of the software onboarding process will likely be an outlier, and will need to be weighted differently.

Next, calculate the revenue that’s been generated per sales lead. To do this, segment leads based on their source in order to better understand the successes and potential failures of the sales and marketing processes.

How much did you spend on acquiring each new customer? This is the final, miniscule metric that needs to be understood when measuring the revenue generated by your business. Details are crucial when measuring ROI, and understanding how much each costumer “cost” through marketing and sales efforts can help give you a better understanding of what’s working and what’s not, even beyond CRM.

Value General Productivity and Efficiency Improvements, But Look at Bottom Line

Productivity and efficiency are at the heart of CRM and marketing automation tools, but they shouldn’t necessarily have a factor in the calculating an actual ROI for your business. Take a look at these factors, and make a list of how the new software has made the team more productive and efficient (or not, in some cases), but keep them separate from a numerical ROI. These are soft benefits that will be important after you’ve gotten ROI calculated and are moving toward the evaluation and looking-ahead process.

…Unless They Can Yield a Monetary Value

That being said, sometimes productivity and efficiency levels do yield a monetary value. For example, your business’s new CRM software may clear up any issues within sales and marketing, allowing for you to cut out ineffective selling strategies or marketing programs. These savings would need to be calculated into ROI as a positive impact on your business.

Finally, the Simplified Equation

CRM ROI CalculationCongratulations! You’ve successfully calculated the ROI of your CRM software. From here, you’ll need to evaluate what that ROI really means for your business. In addition, you’ll want to take a look at the soft benefits of your CRM to see if that has any impact on the numerical metric that you’ve calculated.

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