Maximizing Your Investment: A Guide To Conducting ROI Analysis
In today’s increasingly technology-driven world, businesses are constantly seeking out solutions to improve their operations and stay competitive. Many companies invest in new technology solutions to automate processes, increase efficiency, and enhance overall performance. However, before making a technology investment, it’s essential to consider the return on investment (ROI) and ensure that the investment will generate a positive return and meet business objectives.
For those of us in controlled environment agriculture (CEA), this is especially important. The margins in agriculture are low and any new investment must provide a return.?
There has been a recent trend from technology companies in the CEA industry advocating that growers skip the ROI process, as innovative technology doesn’t have a simple ROI equation.?
We could not disagree more.?
Every grower should conduct an ROI analysis on the technology they’re considering. Technology companies should assist in the process and provide specific examples of how other customers have seen improvement.??
At IUNU, we work with every grower to conduct an ROI analysis specific to their operation. We’re releasing our blueprint now, hoping that others might use this framework to evaluate technology for their operation.?
Step 1: Define the investment
This is a good opportunity to outline the scope of the project. What are the specific challenges you’re hoping to solve? Share this scope with the vendor. This helps align the teams on finding a solution rather than selling you things you don’t need.?
Step 2: Quantify benefits
Identify the potential benefits of the investment, including cost savings, productivity improvements, revenue generation, and enhanced customer experiences. Some things will be very easy to calculate (such as labor involved in a process), while others may be more difficult (happier customers), but you should list them all here.?
Step 3: Determine costs
Consider all costs associated with this technology, including the cost of the technology, ongoing recurring fees, cost of maintenance, customer service and support, training, and implementation. Don’t forget about hidden costs. If a company claims they can increase yield, remember that this means your cost of inputs will likely rise. Take all of these costs into consideration.?
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Step 4: Calculate ROI
Calculate the ROI by dividing the net benefit (benefits minus costs) by the cost of the investment.?
Step 5: Conduct a baseline
Once you’ve made a decision to implement the technology, conduct a baseline of performance today.?
At IUNU, we work with you to conduct the baseline. One of our horticulturalists will help to identify areas of opportunity and document the current status of each. We’ll agree on this together as our starting point.?
Step 6: Monitor and measure ongoing performance
Don’t end the process with an ROI analysis during the sales process. Keep monitoring performance on an ongoing basis and work with your vendor to ensure you’re seeing the ROI you expect.?
Calculating ROI is not only a critical step in determining the financial feasibility of a new technology solution, it also helps you set the expectations for the performance of the system. This leads to higher success when implementing because the teams (both internal and vendor) are aligned around what success means to you.?
If you’d like to see if IUNU products are a fit for your greenhouse, reach out and we’ll get an ROI analysis started with you right away.