1 / 19

Simple Return on Investment Calculations

Simple Return on Investment Calculations. Elton Billings elton@cluebox.com. Focus of This Discussion:. Tactical ROI ROI for a single initiative or application Identification of sources of Return Examination of task cost savings on a per-transaction basis. Some ROI Comparison Methods:.

salena
Download Presentation

Simple Return on Investment Calculations

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Simple Return on Investment Calculations Elton Billings elton@cluebox.com

  2. Focus of This Discussion: • Tactical ROI • ROI for a single initiative or application • Identification of sources of Return • Examination of task cost savings on a per-transaction basis

  3. Some ROI Comparison Methods: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • Return after deducting Investment for a fixed period: • (Return - Investment) • How long until Return equals Investment: • (Investment / Return per week)

  4. Identifying Costs (Investment) • One time costs • Development costs • Cost of any new software • Cost of any new hardware • Training costs • Ongoing costs • Information update costs • Maintenance costs • Training costs • Costs to increase capacity when needed

  5. Identifying Sources of Return • Savings through shorter task time • Savings through shorter processing time • Savings through the prevention of “leakage”

  6. A Method for Identifying Savings: • Observe old process • Observe new process • Make sure to include all phases of both methods • Measure process times for both • Check for any statistical differences in outcome • Measure frequency of task • Understand fully loaded employee cost per hour

  7. Old Conference Room Application:

  8. Web Conference Room Application:

  9. Costs and Savings • Costs: • 3 days to develop interface • 24 hrs x $40 = $960 • Savings: • Each reservation took 10 minutes less • 4560 non-recurring reservations first year • 760 hrs x $40 = $30,400

  10. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($30,400 / $960) x 100 = 3167% • Return after deducting Investment for a fixed period: • Return - Investment • $30,400 - $960 = $29,440 • How long until Return equals Investment: • Investment / Return per week • $960 / $585 = 1.6 weeks

  11. Business Card Request:

  12. Identifying Sources of Return • Online form and paper form took about the same time to complete • ?????????? • The rest of the story… • Paper form left in manager’s inbox for approval • When we tried to follow up, it was gone • Filled out form again • Purchasing department completed and sent printing request to vendor

  13. Costs and Savings • Costs: • 5 days to develop application and web interface • 40 hrs x $40 = $1600 • Savings: • Each order took 10 minutes less time for routing and processing • One third of orders involved about 6 minutes for searching, questions, and re-submission of forms • 743 Orders first year of application • 148 hrs x $40 = $5920

  14. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($5920 / $1600) x 100 = 370% • Return after deducting Investment for a fixed period: • Return - Investment • $5920 - $1600 = $4320 • How long until Return equals Investment: • Investment / Return per week • $1600 / $114 = 14 weeks

  15. New Business Card Request:

  16. Vacation Request:

  17. Identifying Sources of Return • Old process was to send e-mail to department admin, who forwarded to payroll after approval • Online approval process cut delays due to missing information, loss of e-mail • The rest of the story… • Discovered verbal approvals sometimes skipped process • E-mails not always forwarded • No reliable record of requests existed • “Leakage” may have been as great as one day per person per year

  18. Costs and Savings • Costs: • 5 days to develop application and web interface • 40 hrs x $40 = $1600 • Savings: • Each request took 10 minutes less time for routing and processing • 3218 requests in first year • 536 hrs x $40 = $21,440 • Estimated 5% of employees correctly reported one additional day of vacation each • 5% x 800 employees = 40 days • 320 hrs x $40 = $12,800 • Total savings = $34,240

  19. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($34,240 / $1600) x 100 = 2140% • Return after deducting Investment for a fixed period: • Return - Investment • $34,240 - $1600 = $32,640 • How long until Return equals Investment: • Investment / Return per week • $1600 / $658 = 2.4 weeks

More Related