Adding a new feature to your site has the potential to completely transform its usability and profits. You may find yourself using basic SaaS features that don’t do exactly what you need them to anymore. It may be time for an investment in your site's software.
Questions such as “Is it worth it?” or “How long until I get investment back?” reasonably pop up in your head. Jumping into a new feature without knowing the answer to these questions can be harmful to your business. Minimizing the risk is extremely important, unfortunately, you can only go so far, the risk will always be there, and sometimes it’s what’s needed to take your company to the next level.
Perhaps you’re thinking that your company does not have the financial capability that an enterprise has to invest in improving software. Fortunately, by calculating the potential ROI (return on investment), you may see that you do not need significant funds or that those funds will quickly return. Calculating the potential ROI may be the tool you need to assess and understand how much to invest and how long until you get a profitable return.
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What is ROI?
Return on investment is a way to calculate the cost and benefits of a particular investment. ROI calculations are primarily used to compare two different investments. The higher the ratio is, the greater the return earned. The return on investment formula figures this way:
ROI = Potential Gains / Cost of Investment * 100
Here’s a basic example, an investor buys $2,000 worth of stocks and sells the shares two years later for $2,400. The net profit from the investment would be $400 and the ROI would be calculated as follows:
ROI = (400 / 2,000) x 100 = 20%
Calculating for a software feature would work out the same way. The ROI formula is a remarkably simple yet extremely useful calculation that can be utilized to make smart financial decisions. It can also be a method of seeing how an investment has performed overall.
Why Invest in a New Feature?
Creating a website these days is no longer very difficult thanks to a plethora of providers that will support you in creating your site while giving you basic functionality. However, making a great website that speaks to your target audience is still very complicated and requires consulting. You might not even know what new features can do for your site and business overall. Your website is an extension of your business and figuring out where to draw the line is challenging and requires the use of smart consultants. Great software will support your business in:
- Importing data in real time e.g. customer service, hospitality, deliveries, etc.
- Synchronizing web purchases and invoices
- Running routine tasks e.g. saving labor time, reduce mistakes, etc.
- Creating accurate email campaigns
- Making content management easier
If your business is struggling with making basic tasks much longer than they should, then there is software out there to assist you. Acquiring this software might seem like a significant investment now but in the long run, it can save your business money. The amount of time before you get a return on that investment is the primary question.
Finding out what your site needs are where you should start. Some questions to ask yourself are: Do I need a faster site? Should I optimize for my audience? Can I handle substantial future growth? Will it matter?
For now, all you can do is guesstimate your potential profits. What can you estimate when it comes to a site feature? Gathering all your businesses potential gains and costs is the first step. You may be surprised at what can count as a gain and what prices you might not see upfront.
New Feature Potential Gains
Your potential return is the amount of money you stand to gain from implementing new software on your site. If you are a retail store, then this can be simple to calculate because you will see a definite increase in sales. Other companies where you are not selling a product will see different kinds of benefits.
If you are in a service industry such as, real estate or an event promoter, then some software that can help you would be something that increases your strategic value to give you a head start on competitors. Maybe you are in health care, then you might not see an increase in sales but a decrease in costs thanks to software that supports in creating efficient processing, which saves time.
More efficient software. Software packages that support your company in doing tasks more efficiently will save you money. Whenever your business saves time, it saves money which you can add to your potential returns. Features such as faster loading pages, strategically placed call to action buttons, faster calculations, and anything that makes customer tasks easier and faster would count as a benefit.
Previous Costs. Be sure to also calculate into the potential gains the money you are saving from not using the old system you were before. For example, you can calculate the difference between the time employees would spend to get a task complete on the old system vs. what it can be on the new one.
Strategic Value. Check and see if the new software helps boosts your companies strategic goals and plan setting. When the new software gives you a head start over your competitors, you gain market initiative which is extremely valuable.
Users of Software. How many people will be impacted by this new feature and what are their potential gains in efficiency? Anywhere you can make your site more efficient you will be saving time and money that you can be used elsewhere. Be sure to collect the information of who is using your site and what features they use the most. The number of customers affected by the new software has a massive influence on the amount gained.
Customer Friendly. When the software makes the customer's life easier, then they will take more action which will help your business thrive. Another important aspect which is essential to business growth is developing a trustworthy brand. If your new software helps build a brand, then that is a potential gain. A survey taken shows that 31% of adults admit that brand trust influences their decision when buying while only 2% say it doesn’t affect their choice at all. When consumers trust a brand, then they will spend more time on the site which increases the chances of a sale. Making your software customer friendly is a total game changer for sales which makes it a potential gain.
Customer Engagement. What is the estimated change in users interacting with the new feature and taking action on the site? Everything can look fresh and shiny on your site, but if it does not change customer behaviour even slightly, then the benefit stops there. An example would be having a landing page that drives customers to take action.
Cost of Investment
The cost of your investment is any money you invest in developing the new site feature. Many of the costs are also invisible such as time lost implementing and subscriptions to vendors. There is a myriad of factors to take into account when calculating the potential cost of an investment so let’s go through them.
Software Implementation. Add up any charge of installing and programming the software onto your site. Here you can also have the opportunity to compare the prices of other companies to see which ROI comes out better in your favor.
Maintaining. This can look like monthly subscriptions to app services, maintenance, licensing fees, and tech support. When it comes to managing your site, there might be some benefits to calculate. Any maintenance that increases the speed of users entering your site is a potential gain so be sure to minus that from the cost. Also, any service that quickly repairs your site saves money that would have otherwise be lost when down.
Education. The cost of educating your staff on how to use the new feature. Make your calculations based on how much the new software is different from the previous one used. The more similar they are, the less time and money gets spent.
Optimizing. Nothing starts off at 100%, it takes time to get to that point. It’s worth calculating the time it will take to see the full benefits of the software and what that will cost. The time it takes to implement the new feature as well as the time it takes your staff to adjust to utilizing the new feature to the fullest.
Tips When Calculating the ROI
When it comes to calculating the ROI of a new feature, you will frequently find yourself unsure of what numbers to use. Guesstimating may not be easy but try your best to make the calculations and if you have the option to consult with your company’s accountant, then be sure to do so. For example, if you are a carpet cleaning company the and you calculate your ROI would be 20% after implementing the new feature but your companies accountant says you cannot afford that currently then it’s a no go for now on that investment.
It is always best to calculate the ROI with a timeframe. Making a return on your investment ten years from now is not a goal that works. You want to make sure your investment is returned to you as quickly as possible in a manner that supports your companies growth. Also, be sure to keep in mind that your ROI for the first month will look very different to your ROI for the course of the year due to implementation spending.
In your calculations be sure to come up with a pessimistic and an optimistic outcome. Showing the worst outcome could still end up benefiting the company which gives you a greater reason to go with the new feature. Coming up with these range of outcomes will help you to see if your company can handle a pessimistic outcome and show you if even the best outcome is worth it. Most likely, you will land somewhere in the middle of these calculated results.
Remember, you are going to have to make a lot of strategic assumptions when calculating the ROI for your new feature. Only 8% of marketers surveyed reported that they see themselves as “very successful” when measuring the return investment. Do not let the stress slow you down and calculate to the best of your abilities, aim for excellence rather than perfection!
Knowing Where You Stand
Once complete, you should know where your company falls with its ROI for the new feature. If you took into account the list above, you should have a great starting point for calculating the ROI. With this information, you can see if implementing the new feature is worth the risk or if it is best to wait for now. Either way, you can set goals for your business now that you know your strengths and weaknesses.
Taking into account all the variables involved when it comes to an implementing a new feature is far from simple. Many of the costs and benefits are difficult to quantify which makes them difficult to put numbers to specifics. Regardless, it is the closest we can come when calculating business decisions. With this information, you should be able to create a solid outline of where to take your company next.