Calculating Automation ROI: A Practical Framework

Automation requires investment - time, money, and attention. This framework helps you measure whether that investment is paying off and prioritize future automation efforts.

The ROI Formula

At its core, automation ROI is simple:

The challenge is accurately measuring both value and cost.

Calculating Costs

Direct costs:

• Software licensing: Monthly/annual fees for automation tools
• Implementation: Consultant or agency fees
• Integration: Developer time for custom connections
• Training: Time spent learning new tools

Indirect costs:

• Maintenance: Ongoing updates and fixes
• Monitoring: Time checking automation health
• Error handling: Dealing with failures and edge cases

Example cost calculation:

Calculating Value

1. Time savings value

Formula: Hours saved x Hourly cost of person doing the work

Example: Automated onboarding emails

• Previously: 30 min/day manually sending welcome emails
• Now: 0 min (fully automated)
• Time saved: 2.5 hours/week = 130 hours/year
• Value at $75/hour: $9,750/year

2. Revenue increase value

Formula: New customers or upgrades x Average value

Example: Trial conversion sequence

• Trial conversion rate before: 8%
• Trial conversion rate after: 12%
• Monthly trials: 500
• Additional conversions: 20/month
• Average LTV: $600
• Value: $144,000/year

3. Churn reduction value

Formula: Prevented churns x Average revenue retained

Example: Dunning sequence

• Monthly payment failures: 50
• Recovery rate before: 30%
• Recovery rate after: 65%
• Additional recoveries: 17.5/month
• Average MRR per customer: $50
• Average remaining lifetime: 8 months
• Value: $84,000/year

4. Cost avoidance value

Formula: Hires avoided x Salary + benefits

Example: Support automation

• Ticket volume handled: 1,000/month automated
• Time per ticket (manual): 10 minutes
• Hours avoided: 167/month
• FTE equivalent: ~1 full person
• Loaded cost avoided: $80,000/year

ROI by Automation Type

Based on aggregated data from SaaS companies:

Building Your ROI Model

Step 1: Baseline your current state

Before automating, measure:

• Time spent on the manual process
• Current conversion/retention rates
• Error rates and rework time
• Customer satisfaction scores

Step 2: Project expected improvements

Be conservative. Use industry benchmarks as guides:

• Trial conversion improvement: 20-50%
• Payment recovery improvement: 50-100%
• Support deflection: 20-40% of tickets
• Time savings: 80-95% of manual time

Step 3: Track actual results

After implementation, measure the same metrics. Compare to both baseline and projections.

Step 4: Calculate true ROI

Use actual numbers, not projections, for business decisions.

ROI Calculation Template

Prioritizing Automation Investments

When deciding what to automate next, score opportunities on:

• Value potential (1-10): How much impact if successful?
• Confidence (1-10): How sure are you of the value estimate?
• Effort (1-10, inverted): How hard to implement?
• Strategic fit (1-10): How well does it align with priorities?

Multiply scores and rank. This helps balance ROI with execution risk.

Common ROI Mistakes

• Ignoring indirect costs: Maintenance and monitoring add up
• Overestimating time savings: Tasks don't disappear; they transform
• Missing attribution: Automation often works alongside other changes
• Short-term thinking: Some automation value compounds over time
• Not measuring baseline: You can't prove improvement without comparison

Conclusion

Automation ROI is real and measurable. The highest returns typically come from revenue-impacting automations like dunning and trial conversion, not just efficiency improvements.

Start by measuring what you have today. Implement automation with clear success metrics. Track results rigorously. Use data to prioritize future investments.

The companies that measure automation ROI invest more confidently and allocate resources better. Make ROI calculation part of every automation initiative.