ROI: How to Calculate It for Field Service Software
One business metric matters more than any other: return on investment (ROI). Every business needs to consider the ROI of each decision it makes – including whether to implement field service software and which to choose. The concept of ROI is simple on the surface but can get complicated in practice. ROI refers to the net gain of an investment compared to the net cost. Expressed as a percentage, it reveals how much a company made (or can expect to make) above their investment in something: land, equipment, software, staff, etc.
ROI helps a company understand the value of its investments in clear, quantifiable terms. When comparing one option against many others, the one with the highest ROI is often the smartest pick. Likewise, after making an investment, the ROI indicates whether the cost delivered on expectations or fell short. Given how much a business has to learn from ROI, it’s crucial to understand how to calculate this metric and use it to your advantage.
ROI – How to Calculate It
The basic ROI formula works like this:
Cost of investment
A simple example can help illustrate how this works. Imagine a business invests $100,000 in a piece of property it later sells for $150,000. Slotting those numbers into the ROI formula from above looks like this:
ROI = ($150,000 – $100,000) / $100,000 = 0.5
The company made a 50% return on its investment. As long as a company knows the cost and gain of an investment, calculating the ROI is simple arithmetic. Unfortunately, those aren’t always clear.
Costs, for instance, can be direct and indirect. When a company buys a new piece of equipment, there’s the direct cost of leasing/purchasing it but also the indirect cost of operating, insuring, and maintaining it, as well as hiring or training staff to use it. How much the company paid for the equipment and how much it actually costs are two different figures.
Gains can also be unclear. Imagine if the new piece of equipment allowed a job that used to take 10 hours to finish in 5. Working twice as fast has undeniable value for a company that wants to complete more work and keep customers happy – but how, exactly, do you put a price tag on it? Gains are often abstract: improvements in efficiency, agility, insights are all meaningful but hard to quantify. Furthermore, gains can go overlooked or be overestimated.
ROI may have a simple formula, but arriving at the right result can be a challenge. That’s why it’s important to invest time in the effort, to know what an acceptable return looks like, and to pursue investments with a predictable ROI.
What is a Good ROI for Field Service Software?
Every company will decide for themselves what a good ROI looks like. Some will be satisfied with a return of a few percent while others will insist on much higher returns based on their strategic objectives. How long it takes to achieve the intended ROI matters too – waiting years might not be worth it.
Also important to explore is how to get an accurate understanding of the ROI of field service software. The costs are fairly concrete, at least with a solution that’s efficient to implement and intuitive to use. The gains, while clearly felt, are harder to put into hard numbers.
How much does a business benefit when it has a single source for data? What is the long-term value of keeping customers engaged and satisfied? What are the total savings of streamlined work order management? To what extent does improved visibility and analytics lead to better decision making?
These gains all factor into the ROI of field service management software – but how?
Speak with a NextService ROI expert to get a more personalized ROI based on a more detailed analysis of your field service operations.