How to Calculate ROI in Sales [+ free ROI calculator]
If you work in sales, you need to understand ROI (Return On Investment) in order to calculate and analyze the performance of your sales, your employees, or your tools and apps’ performance.
If you aren’t familiar with calculating ROI, we’ve got you covered.
This article will give you a full understanding of the ROI analysis.
You’ll learn what ROI is and why you need it, the ROI formula and how to use it, an example of calculating ROI, and your potential ROI using Badger.
At the end of this article, you’ll find a free ROI calculator to save you time and effort when evaluating the benefits and losses of your investments.
What is ROI
Return on Investment (ROI) is a measurement of the benefit or loss investors receive as a result of their investment.
Knowing how to calculate your ROI helps you figure out whether your investments are going to be profitable or a waste of money.
The formula is often used to calculate and compare things like:
- Productivity of employees
- Profitability of investment projects
- Profitability of firms
- Benefits of two productivity tools (e.g. two field sales apps)
ROI in Sales
Working in sales, you can use ROI to measure and compare the effectiveness of your sales reps, your training/sales enablement strategy, and the sales tools you’re using.
For example, if you’re unsure about which CRM you should use, you can try testing two or more for a period of time, and then use the ROI formula to compare the results.
As a sales rep, you can also use ROI to close a deal by showing your prospects how your product or service will increase their return.
For example, at Badger, we show you exactly how much you can save by using our software, and we even offer an ROI calculator to test and see the results yourself.
To calculate ROI, divide the profit gained from the investment by the cost of the investment and multiply it by 100:
- ROI = (Profit Gained from Investment/Cost of Investment) * 100
To use the formula above, you first need to find the profit from your investment:
- Profit Gained from Investment = Extra Revenue Gained - Cost of Investment
Using the ROI Formula
Using the ROI formula, you can easily distinguish low-performing investments from high-performing ones.
By using this simple formula, you can decide whether your investment is worth it or not.
You can also use this calculation to see how the investment has performed to date.
Keep in mind that the result is expressed as a percentage because it is easier to understand.
Benefits & Limitations of the ROI Formula
Benefits of ROI
- Flexible and Easy to Calculate
ROI is commonly used because of its flexibility.
To use the formula, you only need two numbers (profit and cost).
However, if you use our ROI calculator, this becomes even easier.
The results you get from using the ROI formula are expressed as percentages.
This makes it super easy to analyze and compare your investments.
ROI is conventionally used as a measure of success for an investment.
It is almost always guaranteed that when you use it, people will understand.
Limitations of ROI
While ROI is very commonly used for comparing investments, you have to be careful while calculating it.
ROI ignores the time value of money (the fact that one dollar today is no longer one dollar tomorrow).
Only use the ROI formula to compare investments under similar circumstances, holding all other factors constant.
If you’re comparing the investment period of one year with that of three years, it’s more accurate to use other indicators (such as CAGR) instead of ROI.
- Susceptible to Manipulation
When calculating ROI, you can take different approaches to measure profit and cost.
Because of this, the result is susceptible to manipulation and is only valid if the profit and cost are directly related to the investment.
To calculate the real ROI, you should take into account all possible costs and profit related to the investment.
Calculating Your ROI with Badger Maps
Let’s say that last month you started using Badger Maps to conduct a test and see if it’s a profitable investment.
Now, you’d use the ROI formula to calculate the return you got from using this tool.
- Badger Maps cost you $49 and brought an $8,800 increase in sales. (This number will vary based on your miles driven, gas expense, etc. For a more accurate calculation, use the free ROI calculator at the end of this article).
To calculate the ROI, you’d use the ROI formula:
- ROI after using Badger: [($8,800-$49)/$49]*100 = 17,859 %
Based on this calculation, you’d get a 17,859 % return from using Badger Maps.
For many ROI calculations, the result will be a lower percentage. But when it comes to route planners, the return on investment is high because of the low pricing and high potential for monetary gain (in other words, using a route planner, you can save a lot of money, especially on gas!)
Your Potential ROI with Badger
If you’re a field sales rep or you manage a field sales team, you would benefit from an all-in-one tool that’ll save you money and time spent between planning and driving.
Let’s say that you decided to try out Badger’s free trial and test it for a month.
How can you calculate the monetary return on your investment?
In other words, how can you know exactly how much money you’re saving by using Badger Maps?
Based on data from the average sales team, using Badger for 1 month results in:
- 20% less miles driven
- $71 gas savings
- 32 hours saved planning and scheduling
- 13 hours saved driving
- 22% increase in sales
For more details, check out how you can sell 22% more and drive 20% less with Badger.
Then, use our Free ROI Calculator (find it in the section below) and input your own numbers to see how much money you stand to gain in a month.
Free ROI Calculator
Now that you know everything about ROI, you can calculate all your investments using the ROI formula.
But because we know how valuable time is to you, we created an ROI analysis template to let you evaluate your investments without any hassle.
This Sales ROI Calculator is built to measure the potential return on investment of using Badger Maps 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.
This calculator takes into account all of the perks that come from using Badger Maps, including revenue increase, additional free time, and savings from fuel.
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