How do you measure ROI for your tech and automation?

1 Define your goals and metrics

Before you can calculate ROI, you need to define your goals and metrics for your tech and automation projects. What are you trying to achieve with your investment? How will you measure the results? For example, you may want to reduce labor costs, increase sales, enhance customer loyalty, or improve food safety. Depending on your goals, you may use different metrics, such as labor hours, revenue, retention rate, or compliance rate. You should also set a baseline and a target for each metric, so you can compare the before and after scenarios.

2 Estimate your costs and benefits

The next step is to estimate your costs and benefits for your tech and automation projects. Costs include the initial purchase or installation, as well as the ongoing maintenance, training, and support. Benefits include the savings or gains from your tech and automation, such as reduced labor costs, increased sales, enhanced customer loyalty, or improved food safety. You should also consider the time frame and the frequency of your costs and benefits, as some may be one-time or recurring, and some may have a delayed or immediate effect.

3 Calculate your ROI

Once you have estimated your costs and benefits, you can calculate your ROI using a simple formula: ROI = (benefits - costs) / costs. This will give you a percentage that indicates how much profit or loss you have made from your investment. For example, if you invested $10,000 in a new POS system that increased your sales by $15,000 in a year, your ROI would be (15,000 - 10,000) / 10,000 = 0.5 or 50%. This means you have earned $0.5 for every $1 you invested.

4 Adjust your ROI for risk and uncertainty

However, calculating ROI is not always straightforward, as there may be risk and uncertainty involved in your tech and automation projects. Risk refers to the possibility of negative outcomes or losses from your investment, such as technical glitches, customer complaints, or legal issues. Uncertainty refers to the lack of information or accuracy in your estimates of costs and benefits, such as market changes, competitor actions, or customer behavior. To account for risk and uncertainty, you may need to adjust your ROI by using a discount rate, a sensitivity analysis, or a scenario analysis.

5 Compare your ROI with alternatives

Finally, you need to compare your ROI with alternatives to make informed decisions and evaluate your performance. Alternatives include different tech and automation options, as well as the status quo or doing nothing. You should compare the ROI of each alternative, as well as other factors, such as feasibility, compatibility, scalability, and sustainability. You should also review your ROI periodically, as your costs and benefits may change over time, and you may need to adjust your tech and automation accordingly.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?