22 July 2016
How to Find the ROI of Custom Software Development
When developing custom software, your company is going to want to have a favorable return on your investment. How you calculate that is vital to informing your entire project strategy.
Custom software can be complex and trying to calculate the projected return on it can seem daunting. In the beginning, you only have an idea of what you’re building. So how can you make sure your business gets a positive ROI from your software development application?
There are, in general, two types of custom software and depending on which you build will determine how you calculate your ROI. Watch the video below and read the post to see how best to find the ROI of custom software development.
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1. Business Process Software
Built to handle workflows and processes inside your business, these aren’t measured in sales, but in efficiency – usually in terms of hours, not dollars.
- Process Efficiency – how much time will this new software save vs. doing it manually?
- Communication – will this new application reduce unnecessary communication and follow-ups?
- Supply Chain Improvement – how much extra data on your supply chain will you gain that can inform you of potential bottlenecks and slowdowns?
- Sales – will you get more up-selling, increased sales, lead conversion increased?
- Asset Management – is maintenance improved, uptime increased, will it allow you to consolidate inventory and resources?
2. Commercial Software
For businesses or consumers, the desired result is the same; sales. But to operate this at scale, you need to dig deeper.
- Market Research – Always start here. Is there a viable market for your software?
- User Acquisition – How much will it cost you to get a new user or lead?
- User Retention – How many that downloaded your software remain customers?
- User Support – Will you have to provide direct support to your users? How will they contact you with questions or issues?
- License (subscription) vs. Retail Model – Are you going to sell licenses (ongoing monthly/yearly fees) which means lower revenue upfront for more long-term monthly revenue? Or sell copies retail, where each sale is a larger dollar amount but lacks a built-in constant revenue stream per customer?
Calculating the ROI of custom software can seem daunting. But if you do the research ahead of time, calculate costs accurately and honestly, you can better position yourself for success.