As a sales manager, you need to understand ROI to evaluate productivity apps, analyze new employees, or buy new equipment. Knowing how to calculate ROI helps you figure out whether your investments are going to be profitable or a waste of money.
If you aren’t familiar with ROI calculations, we’ve got you covered. This article was written to give you a better understanding of ROI, it even includes an ROI calculator for sales investments to save you time and effort when evaluating the benefits and losses of your investments.
What exactly is ROI?
Return on Investment (ROI) is a measurement of the benefit (positive) or loss (negative) investors receive as a result of their investment. ROI is frequently used to compare investment projects and the profitability of firms. It’s also a useful formula for comparing the benefits of two distinct field apps.
ROI is commonly used among companies due to it’s flexibility. Managers and executives use it to measure the productivity of their employees. Investors evaluate the return of stocks and bonds to decide where to put their money. Aside from measuring the financial profitability of an investment, it can also be used to discover the social and environmental gain of a project.
While ROI is very commonly used in comparing investments, we have to be careful while calculating ROI. It’s important to keep in mind that ROI ignores the time value of money (the saying that one dollar today is no longer one dollar tomorrow). ROI can only be used to compare investment projects under similar circumstances. If we are comparing the investment period of one year with that of three years, it would be more accurate to use other indicators (such as CAGR) instead of ROI.
The formula for ROI is as follows:
ROI = (Profit Gained from Investment/Cost of Investment) * 100
In the formula above, the profit gained from the investment is not equal to the revenue gained from the investment. This profit is equal to the extra revenue gained from the investment minus the cost of the investment.
Profit Gained from Investment = Extra Revenue Gained - Cost of Investment
Let’s take the previous example. Say you downloaded two field sales app two years ago, and conducted a test to figure out which app improved your productivity more. In the first year, you solely used app A, which costed you $1000 that year, and you noticed a $1500 increase in overall sales. In the second year, you decided to switch to app B, which costed $1500, and noticed a $2000 increase in overall sales.
To calculate the ROI for both apps you use the ROI formula:
The ROI for app A is: [($1500-$1000)/$1000]*100 = 50%
The ROI for app B is: [($2000-$1500)/$1500]*100 = 33.3%
Based on this calculation, app A generates more return compared to app B.
Notice in the case above, the ROI comparison was made while holding all the other factors constant.
Sales ROI Calculator
Now that you know the uses and formula of ROI, you can evaluate your employees, productivity apps, and other investments more efficiently. As we know how valuable time is to you, we constructed a Sales ROI calculator to let you evaluate each investment without any hassle.
This Sales ROI Calculator is built to measure the return on investment based on the data you input, recorded or projected. It calculates the annual and lifetime benefit of an investment, taking into account both the extra revenue gained and any hard savings. The spreadsheet is color coded, with green cells containing variable data and blue cells showing the calculation results. When you start your ROI calculation, input the relevant data into the green cells and the calculated results will be automatically shown on the blue cells.
Click below to download the Sales ROI Calculator (spreadsheet) for FREE!
Additionally, we specifically constructed another Sales ROI Calculator to measure the return of Badger Maps for sales reps. This calculator takes into account all of the perks that comes from using Badger Maps, including revenue increase, additional free time, and savings from fuel. Sign up for a free trial with Badger Maps today.
Want to calculate the ROI on Badger Maps? Download the free Sales ROI Analysis Calculator for Badger Maps and calculate it yourself!