Automation ROI: how to calculate it before you build
Work out what automation is worth before you build it. The simple equation and the numbers to collect, in plain English.
Nikolas Gannon · · 1 min read · Automation
You should know what automation is worth before you build it. Here is the plain equation.
The equation
Annual value = (hours saved per week × 52 × loaded hourly cost) + recovered revenue − annual running cost
Then payback = build cost ÷ monthly value.
The three inputs
Hours saved. Time the task now. Estimate how often it runs and how long each run takes. Be honest: a task that takes five minutes, forty times a week, is over three hours. That is the real number.
Loaded hourly cost. What does an hour of the person doing the task actually cost, including salary, on-costs and overhead? Use a conservative figure.
Recovered revenue. This is the bigger number. Faster follow-up converts leads that used to go cold. Reliable invoicing bills work that used to slip. Count only revenue you can tie to the change.
The benchmark
Most single workflows should pay back within months. If your calculation shows a payback beyond a year, challenge the workflow, not the math.
What this means for buying
When a consultant quotes a fixed price, do this math yourself. A $1,500 build that saves ten hours a month at $60 an hour pays back in under four months before counting recovered revenue. That is a good investment.
When the math does not work, the honest answer is to not build. That is a normal outcome, and a good consultant will tell you.
The summary
Automation is not a cost. It is an investment with a measurable return. If you want help running the numbers for one of your workflows, the free systems audit covers it.
Free resource: Workflow automation audit workbook
Free resource: Software bill review checklist
Read next: What a small business automation consultant costs · When not to automate · The best AI workflow automation tools for small business
Questions
How do I calculate automation ROI?
Hours saved per week times your loaded hourly cost, plus recovered revenue, minus the build and running cost. Divide by the build cost for payback.
What is a good payback?
The industry median for small business workflow automation is around four months. Longer than a year means the workflow may not be worth it.
What is the biggest number in the equation?
Recovered revenue. Labor savings justify the build, but recovered revenue is usually the larger driver.