How to calculate and forecast your CRM ROI in 2022 Sales by MATT KEENER June 23, 2020 The return on investment (ROI) calculation is used frequently in business. Marketers use ROI to benchmark the effectiveness of their advertising placements. A $10,000 digital advertising campaign that yields 20 new customers and $25,000 of recurring annual revenue, for example, has a favorable return on investment. The basic formula for calculating ROI is not overly complicated. Simply divide your net profit by the total investment, multiply by 100, and you have your number: ROI = net profit / total investment * 100 But estimating ROI for a business system—such as a Customer Relationship Management system (CRM) —is not as straightforward as a one-time advertising campaign. In this post we will explore best practices for estimating the return on your CRM investment (e.g. the ROI of CRM). Let’s start with perspective Going from no CRM to a paid monthly (or annual) subscription is a new expense and takes a bit of adjustment. After all, up to this point, your business has been successful without a CRM. Will the new expense of a CRM solution be worth the upfront and ongoing investment? How long before you recoup your investment? Wouldn’t the money be better spent on paid promotion, freelance labor, or something with more immediate impact on performance? To answer questions like these, you must have the right perspective. Go back and revisit your original motivation for considering a CRM. Most likely, you wanted technology that would help you grow faster and smarter. A CRM, when properly implemented, aligns perfectly with these goals by providing the tools you need to: Increase sales revenue/revenue growth Decrease operational costs Maximize internal collaboration and productivity Let’s take a closer look at each of these. Revenue growth A CRM cannot make cold calls for you. It cannot source and hire new sales talent. It can’t close deals like your salespeople can. So, how can a CRM contribute to top line growth? In short, a CRM maximizes the impact of your salesforce and your sales processes and systems by: Freeing up sales reps to sell more Sales reps don’t want to waste time fumbling with spreadsheets or subpar CRM systems and arguing over lead assignments. They want to sell. Lead management, workflow automation, and assignment rules make sales reps more productive and less distracted. Focused sales reps find more time for prospecting, customer acquisition, and upselling, which results in a healthier pipeline. Providing transparency into what’s working (and what’s not) Your sales team tries their best. No one doubts that. Aside from their personal anecdotes, however, how can you definitively know which actions and team members are contributing to your success? Without a CRM, it’s difficult to track and measure performance. CRMs are built to increase the transparency and accountability of your sales operations. Pipeline visibility dashboards, lost deal monitoring, and sales rep performance reports deliver actionable, data-driven insights for measuring success or failure. Aligning sales and marketing In today’s virtual world, sales and marketing teams frequently operate in isolation from each other. Marketing focuses on content creation and delivering MQLs, while sales builds pipeline. This sounds great in theory, but, in reality, it rarely works due to goal misalignment. CRM technology bridges the divide between sales and marketing. Marketers gain insights into conversion rates to understand which leads convert into paying customers and therefore contribute most to the bottom line. With the right CRM, sales reps enjoy greater visibility into the status of important marketing initiatives and lead flow in real time. All of this creates a virtuous sales cycle that, hopefully, leads to streamlined and enhanced communication and collaboration between two vital departments. Increasing the value of your data When properly organized, customer data can be one of your most valuable business assets for revenue-generating teams. However, data that is unstructured and spread across countless inboxes, spreadsheets, and disintegrated business systems cannot be fully leveraged. A CRM creates structure and makes it easier to identify and prevent bad data. This alone can justify the cost of investment in improved customer retention. Cost management Implementing a CRM can also create numerous cost saving opportunities. Here are a few basic possibilities: System overlap reduction CRM vendors are constantly developing new features and apps that meet the evolving needs of their customers. From integrated marketing automation to project management to contact enrichment, CRMs support a variety of use cases that allow businesses to simplify their tech stacks and reduce overlapping software costs and training costs. Be sure to be continually looking for upgrades to your system as your business needs evolve. Process enhancement Automated workflows present limitless possibilities for reducing (or reallocating) monthly expenses. For example, does it really make sense to have a freelancer spend 20 hours per month on record management if your CRM can handle most of the work? Wouldn’t that freelancer deliver more value if reassigned to higher impact activities? When you choose a flexible, customizable CRM, you can set up workflow automation at a level that makes sense for your team and business – regardless of if you have a small business, mid-sized operation or and enterprise. Process elimination A CRM may even be able to eliminate costly inefficiencies and bottlenecks in your business. Integrated web-to-lead forms, for example, collect website inquiries and create matching lead records on your behalf. In addition, Insightly users rely on the Insightly mailbox feature to rapidly save contacts, organizations, and related data from their inboxes—with zero manual data entry. Collaboration & productivity Beyond revenue growth and cost reduction, consider the intangible benefits of a CRM. Even a marginal improvement in the following areas can have a lasting, positive impact on your ROI calculation: Enhanced information sharing Reliable, actionable information is what your people need to perform their jobs. Guaranteeing reliable, actionable data is difficult, however, when your organization is plagued by silos. A CRM overcomes data silos by centralizing all of your most important customer, project, and business intelligence into a single, collaborative ecosystem. Team members can instantly search, filter, and view data from any web-enabled device—rather than digging through countless documents, spreadsheets, and network folders. Integrated task management Projects aren’t the only thing that require accountability tracking. Sometimes you just need proof that a sales rep actually followed up on a major deal as promised. CRMs that offer built-in and flexible task management capabilities provide more control to ensure everyone—including sales—stays on track. Accountability leads to productivity, and productivity leads to success. Intuitive record-linking To build new relationships that align with your corporate vision, you should carefully examine the existing relationships that have led to your current success. That’s hard to do on a whiteboard or in a spreadsheet—especially if you have hundreds or thousands of client relationships. A CRM provides a flexible way to track and view all of your business relationships. Linking records together is especially useful to serve existing customers. Your total investment Any discussion about ROI must also consider the “investment” side of the equation. When properly implemented, a CRM should far outweigh the upfront and ongoing costs. Here’s a list of costs to consider: Subscription costs: monthly or annual fees paid to the vendor Consultant fees: data migration, system customization, etc. Training and onboarding: in-house opportunity costs to train and onboard users CRM administration: staffing required to manage data, users, CRM integration and customizations Other costs: additional user licenses, data integrations, and record overage charges Obviously, these categories can vary based on your feature requirements, in-house technical capabilities, and vendor pricing. That’s why it’s important to do your homework and select a vendor that offers the features and support you need at a reasonable price. At the end of the day, calculating return on investment for your CRM is a multi-faceted endeavor. When measuring CRM ROI, consider all of the ways that your CRM impacts revenue, expense management, and productivity. In doing so, you will likely find that the benefits outweigh the cost. To learn how Insightly helps companies to get the highest ROI on CRM, request a free demo. Request a demo Revenue tracking | Sales Force Automation | Sales KPIs MATT KEENER Matt Keener is a digital marketer and President of Keener Marketing Solutions, LLC. In addition to consulting for Insightly and other SaaS clients, Matt enjoys blogging about remote work. Get Matt’s top-rated book or connect with him on LinkedIn.