How to calculate CRM ROI and see how much you are saving

The term CRM ROI refers to the return on investment in a customer relationship management system. It is calculated as a percentage of revenue increase or savings to show how your bottom line is positively impacted by the CRM software.

Whether you run a small business or a large enterprise, a CRM system with great user experience will prove of great value. Not only will it address many business needs, but it will also improve business processes across the board – from lead, customer, and opportunity management to project management and financial reporting. But adopting new software can be met with a certain degree of apprehension by some team members. Calculating the return on your CRM investment with the help of a CRM ROI calculator and quantifying potential savings will help win over even the most reticent team members.

Preparation: 3 Easy Steps Before Calculating your ROI

Like any other ROI calculation, quantifying the return on your CRM investment requires laying down a foundation and some prep work. Below is a simple 3-step process to demonstrate the ROI of CRM. Establishing improvement criteria, tracking metrics, and estimating the implementation budget. Let’s take a closer look at each step.

1. Establish Improvement Criteria

A CRM system can be used by sales and marketing teams alike and will therefore impact not just your sales revenue, but also conversion rates for your marketing efforts. When establishing your criteria, keep in mind that you don’t have to limit yourself to one area. You can select more KPIs (key performance indicators) that you want to improve. Below is a list of areas that a CRM software can improve:

Increase lead conversion rate. Number of leads coming in vs number of opportunities closed.
Reduce the time it takes to create proposals. This also translates into a higher number of bids sent out. It is not necessarily related to the time that it takes to estimate a job, but the actual time of creating a proposal.
Increase the amount of follow-up emails sent out. This ensures that all opportunities you bid receive appropriate follow-up to make sure you close as many as possible.
Improve overall closing rate and/or closing rate with specific customers. If follow-up is improved, you can expect your closing rate to go up as well.
Increase sales revenue. This is a natural outcome when the improvements above materialize, but it is always nice to see some exact numbers.

2. Track Metrics

Producing an accurate ROI calculation requires us to track certain business metrics before and after the CRM implementation. What you need to track depends on the improvement criteria you established in step 1 of the CRM ROI calculation process. Below are a few examples to help you identify the appropriate metrics to track:

Number of marketing campaigns and their conversion rates
Average number of proposals an estimator or salesperson can complete each day
Amount of time it takes to complete each proposal
Number of deals closed / won (per department, business developer, or sales person)
Number of deals lost
Total number of proposals or bids your sales and estimating teams send out

3. Estimate Implementation Budget

The cost of investment when implementing a CRM software may not be as straightforward as pricing per user. During the initial implementation phase, you may incur a data migration cost as well as a training cost. Another aspect to watch is that many software companies like upsell certain modules, functionalities, or customizations. We highlight below possible costs to consider when estimating your implementation budget:

Initial setup fee
Data migration fee
Cost per user per month (or year)
Training costs (ideally, you’d want a user-friendly system from a software company that offers some free training, not just paid)
Additional modules or functionality cost (one time cost, or monthly, or yearly)
Customization costs
Man hours (translated into dollar amount) needed to gather all the data needed for the system and for the initial setup.

Calculate ROI: How much money could you be saving per year?

Before you start implementing a CRM system, it is recommended that you calculate CRM ROI. This process will highlight the benefits of CRM software and ensure that your CRM investment will have a positive impact on your company’s sales revenue over time. Let’s take a specific example and see how much money we could be saving each year with a CRM system.

Applying the 3-Step Process for the CRM Implementation

Let’s assume we have a construction company looking to implement a CRM. Our improvement criteria are:

Cut down the time it takes to create a proposal by 50% (which also means our sales team will be able to send out more proposals)
Send follow-up emails consistently with the help of a follow-up calendar or tool and CRM reminders

Based on the criteria above, our initial tracking metrics are:

3 estimators
Each estimator completes 2 proposals per day
It takes an average of 2 hours to complete a proposal
Each estimator makes an average of $35/hour
Your current closing rate is 15%

The cost of implementation is: $1,500 initial setup ($1,000 setup + $500 one-time-fee for an additional module we need). You’ll have 5 users (3 estimators, 1 sales rep, 1 executive) at $50/user/month. That is a cost of $250/month or $3,000/year

CRM ROI Calculator

3 estimators sending out an average of 2 proposals/ day -> total of 6 proposals/day
It takes each estimator 1 hours to create a proposal and they make $35/hr ->6 proposals * 1 hr each * $35 -> $210/day in proposal creation
A year has 260 working days
It is currently costing you $54,600 per year in proposal creation ($210*260)
With a CRM software equipped with a proposal generator, you’re cutting proposal creation time in half
You will be saving $27,300 in proposal creation alone
You can also consider that by cutting down proposal creation time, you’ll have time to bid more work and so your closing rate will increase with an average of 5%. But for the sake of simplicity, we’ll only look at the pure savings of $27,300

So, in the first year, you will spend a total of $4,500 on the implementation and save at least $27,300. That amounts to $22,800 in savings in the first year.
The second year, you’ll save $24,300 as the cost will go down to $3,000.

These are substantial savings and ROI from your CRM system looking at just one area of improvement. The savings will go up even more when you consider the other areas that are improved by CRM software.

Download this simple CRM ROI Calculator tool
to calculate return on CRM investment for your specific situation

Should you Implement a CRM System?

The benefits of a CRM system extend not only to your internal organization, but also to your customer experience. Let’s examine each aspect.

CRM Implementation Benefits for the Sales Team

With a new CRM in place, your sales team will have a centralized location for all customer data. When talking to a new customer for example, a sales rep will be able to easily pull up similar data from existing customers to help close the potential customer. Cross-selling and upselling also become easier as salespeople have access to historical customer data, needs, and interests. Another benefit to consider is the fact that customer acquisition time and cost will go down as each sales rep will have access to all customer data, project examples, and other customers’ cost savings. When you move your salesforce away from spreadsheets and into modern CRM technology, every aspect of their day-to-day job is improved, from data entry to proposal creation and closing new work.

CRM Benefits for Your Company’s Customer Experience

Every company strives to offer the best customer experience they can because it directly affects customer retention and revenue. With the help of a CRM system, your sales team will be more likely to send out consistent, professional proposals on time. Sales reps will benefit from access to all customer data, project examples, and other customers’ cost savings when selling them new services. Certain CRM software also offer a customer portal, where each customer can possibly see their proposals, past, and current projects. This will increase customer satisfaction and possibly your closing rate with them.

Save money and time, and increase Sales revenue with iDeal CRM.

Finding and implementing the right CRM solution is important for companies looking to streamline their sales process and increase their sales revenue. If you are in the construction industry, iDeal Construction CRM is the right CRM software for you.

It is packed with all the features you need straight out of box. No pricy customizations needed. The iDeal Proposal Generator will help cut down proposal creation time in half and generate professional proposals that you can email to your customers straight from the system. The bid calendar and follow-up automation tool will help streamline your follow-up activities. The opportunities dashboard will offer you an overall view of every opportunity in the pipeline and its status. Your accounting, estimating, and sales teams will have access to real-time forecasting and sales reports. And best of all iDeal CRM pricing is structured as price per user and is relatively inexpensive.

Also, the iDeal team offers three free training sessions so your training costs will be low, which in turn will increase your CRM ROI. The software is equipped with all the modules you need out of box so no additional charges will be incurred for that. And because this is a niche software, built for the construction industry, users rarely need customizations. But if they do, they are billed at cost, which means iDeal is not looking to profit from customizations. As we said before, if you are in construction, iDeal Construction CRM is the right CRM for you.