The Myth of ROI in SaaS

In the bustling world of small SaaS firms, computing ROI on product development appears borderline redundant.

Without a developed product, there’s nothing to market or leverage for capital. It’s like asking a fish about its experience on land.

When ROI Becomes The Elephant in The Room

Yet, here’s the twist. When a startup isn’t rooted deeply in tech, ROI becomes the towering figure in decision-making rooms.

Most of these ventures take baby steps, putting money into mundane tasks like automation or adapting third-party systems.

But what happens when these non-tech companies stand at the crossroads of a significant project or the ever-daunting ‘buy vs. build‘ dilemma?

Breaking Down the Real ROI Question

So, how exactly does one churn out the ROI for a tech endeavor? It might seem like threading a needle in the dark, but let’s simplify it:

  • Defining the Problem: Initiating a tech solution? Step one is pinpointing the problem. Perhaps it’s about propelling your sales team’s outreach.
  • Identifying the Beneficiary: Even if some projects don’t serve a direct user, there’s always a significant beneficiary. In our narrative, it’s the sales team.
  • Charting Expected Outcomes: This step is like the trailer before the main movie. If your mission is to escalate your sales team’s throughput, we’re discussing efficiency.
  • Laying out the Actual Goal: If the ambition is to slash the time spent drafting and dispatching a cold email, your benchmark might be trimming a 15-minute task to a breezy 7.5 minute.

With these parameters set, you can coin your pivotal KPI (think: cost of cold email per salesperson). Quantify your existing costs and set a tangible ROI. For instance, if you can stomach a six-month ROI, you’re looking at a project with a $72k cap.

Flexibility in Tech Projects: A Silver Lining

Tech ventures possess an inherent elasticity. Our prior analysis shows you have a $72k purse for sales automation, with an ROI aspiration of six months. What are the next steps? Deciding the scope, duration, and team requisites.

Yet, one cannot ignore the undeniable: this pre-planning is a preliminary step. The essence lies in side-stepping this analysis and shifting focus to development costs instead of ROI.

Oh, and here’s the cherry on top. If you keep this venture in-house, you’re also amplifying your company’s Intellectual Property. But, before you plunge into this, a glance at market solutions against your $72k might not be a bad idea.

Dive Deeper: Interested in expanding your understanding of ROI in tech? Check out “Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs” on Amazon for insights into goal-setting and measurements in top-tier companies.

BONUS: The ROI Breakdown

Let’s dig deeper into the calculations to understand the true ROI for tech projects, specifically for sales automation. Here’s a detailed breakdown:

1. Current Emailing Scenario:

  • Salesperson Rate: $50/hour.
  • Time per Email: 15 minutes (0.25 hours).
  • Emails per Hour: Each salesperson sends 4 emails in an hour.
  • Monthly Emails (per Salesperson): 4×8×20=6404×8×20=640 emails (assuming 20 working days and 8 hours per day).
  • Monthly Emails (for 10 Salespersons): 10×640=6,40010×640=6,400 emails.
  • Monthly Cost: 10 \times 8 \times 20 \times $50 = $80,000.
  • Cost per Email: $80,000 ÷ 6,400 = $12.50.

2. Expected Emailing Scenario with Improved Efficiency:

  • Goal: Halve the time for crafting and sending an email to 7.5 minutes (0.125 hours).
  • Emails per Hour: Each salesperson sends 8 emails.
  • Monthly Emails (per Salesperson): 8×8×20=1,2808×8×20=1,280 emails.
  • Monthly Emails (for 10 Salespersons): 10×1,280=12,80010×1,280=12,800 emails.
  • Monthly Cost: Still $80,000 since the pay rate and work hours are unchanged.
  • Cost per Email: $80,000 ÷ 12,800 = $6.25.

3. ROI Calculation:

  • Savings per Email: $12.50 – $6.25 = $6.25.
  • Total Monthly Savings: 12,800 \times $6.25 = $80,000.
  • Six-Month ROI: For a project to break even in 6 months, the budget should equal the 6-month savings: 6 \times $80,000 = $480,000.

From these calculations, for the sales automation project to be worthwhile, if you’re targeting an ROI in 6 months, you can budget up to $480,000, not the initially mentioned $72k. This gives you a clearer picture of how much to invest and what to expect in return.


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Leo Celis