How To Prepare An ROI Calculation

Community How To Prepare An ROI Calculation Liam AndersonNovember 15, 2022 Money, calculator, ROI, return on investment concept

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A very experienced technical sales professional told me something very interesting. Nearly all business-to-business sales attempt to replace an existing solution. He said: “Companies buy solutions that produce the same outputs for a lower price or produce more outputs for the same price."

What Is A Return On Investment (ROI) Calculation? Return on investment (ROI) concept

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ROI calculations are thought experiments to show your audience what will happen if they switch from their existing solution to the proposed new solution. It’s used in the sales process to stimulate discussion.

As a conversation starter, the calculation doesn’t have to be totally accurate. Where you don’t have the full figures, you can make assumptions. They must be based on some sort of reality such as industry benchmarks, for example.

Be conservative in your estimates. If a customer says you have underestimated the savings they will make, then they are selling themselves the product.

Here is a step-by-step guide to how to prepare an ROI calculation, using savings made with a voice biometric authentication system as an example.

Step 1: Define The Experiment Man on laptop working customer service

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Decide what effect switching to the new solution will have. Consider the financial value of the cost reduction or increase in productivity. The voice biometric system won’t make any money itself. It will eliminate the need for agents to ask the customer security questions, so reducing call lengths by approximately 1 minute.

Step 2: Define The Current (Control) State Time, percentage, money, return on investment, ROI concept

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Scientific experiments often have a control. In drug trials, two rats are injected with the target pathogen. One is injected with the drug, while the other isn’t. This second rat is the “control.” It demonstrates what happens if the drug isn’t used.

The basic scenario of the ROI calculation does the same thing.

Assume our contact center has 100 agents on the phones. Each agent handles 100 calls a day and each call is approximately 3 minutes long. Agents are paid USD 10.00 per hour. The agents work 7 hours a day (Breaks are unpaid), 47 weeks per year not including holidays and sickness. Cost per call = USD 70.00 / 100 calls = USD 0.70 per call.

Step 3: Define The Effect Of The Experiment Salesperson listens to help a customer

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Now we define what happens, from the financial perspective, when we use the new solution. In our example, removing the security questions will reduce the call length by 1 minute. Calls are now 2 minutes long instead of 3, so agents can make 150 calls in the time they handled 100 calls. The new cost per call will be USD 70.00 / 150 calls = USD 0.46 per call.

Step 4: Define The Savings ROI, return on investment concept

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We have defined the financial situation before adopting the product and after adopting the product. Now we calculate the savings by deducting one from the other. Before product adoption, the cost per call is USD 0.70 per call. After product adoption, the cost per call is USD 0.46 per call. The savings will therefore be USD 0.24 per call.

Step 5: Introduce The Solution Cost To Calculate The True Savings Woman salesperson talks to a customer on the phone

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The solution itself has a cost. We must factor this into the savings calculation to see if it’s worth buying.

Traditionally, on-premises software was sold with a single license fee and a small annual maintenance fee as a follow-up. Nowadays, software is more likely to be sold under a monthly or quarterly subscription fee or, if it is cloud-based, as a consumption charge. It’s important to express savings in the same time frame as the solution costs.

To keep things simple, let’s assume that our product is priced as a monthly subscription based on the number of named users. The subscription fee is USD 150.00 per agent per month.

An agent handles 150 calls per day for 21 days per month (assuming we lose 2 working days per month to holidays and sickness) which comes to 3, 150 calls per month. Monthly savings will therefore be USD 0.24 per call x 3,150 calls = USD 756.00 per agent per month.

Net savings is the monthly savings minus the subscription fee. USD 756.00 – USD 150 = USD 606 per month. Multiply that by the 100 agents working in the contact center, and you have a total monthly saving of USD 60,600 per month. Multiply that by 12, and you have a savings of USD 727,000 per year.

Skull Busters Return on investment (ROI) concept

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Sometimes customers will tell you they want to do something like “improve CSAT.” The financial benefits are not always obvious. In my experience, the best way to address this is to ask the customers themselves what such improvements will mean financially.

If they can’t tell you this, then they may not really know why they are buying the product.

If they tell you every 1% improvement in NPS scores will lead to a USD half million increase in revenues, build that into your numbers.

If you think the savings look too optimistic, present your more “realistic” figure. Explain that you want to err on the side of caution. Your customer will be reassured by your transparency and prudence.

Presentation Businesswoman looks at charts and graphs

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Your “ally” in the customer’s company may ask you for the ROI calculation to help her persuade the board that buying your solution is a good idea. Provide her with an easy-to-understand presentation with explanatory notes explaining what the facts are and where they come from, what the assumptions are and what they are based on, and what the calculations are and how they were calculated.

She may need to present the calculation without your help.

Wrap-Up

Are you trying to prepare an ROI calculation? Let me know if you need any help!

Further reading...

Try reading this article about building your business case. It might help you flesh out your calculations with some narrative.

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It’s common knowledge that approximately 65% of contact center costs are staffing costs. Inbound staff get paid by the hour. If your cost per call is USD 3.82, then USD 2.90 of that cost is for staffing costs.

If you can reduce AHT by 10%, staffing costs reduce to USD 2.06, and the overall cost per call reduces to USD 3.59—a USD 0.23 cost reduction per call.

Let’s scale these numbers up for a 100-seat contact center. Assuming that each agent handles 50 calls a day, and there are 90 agents working at any one time, then the contact center handles 4,500 calls a day, so it will save approximately USD 1,033 per day, USD 23,000 per month, and USD 276,000 per year.

Common Root Causes And Solutions Call center employee talks to a customer on the phone

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To reduce AHT, the best way to do it is to listen to a selection of calls that are longer than AHT, and a selection that are shorter. You can then see how many of the common root causes listed below you find in the longer calls as opposed to the shorter calls.

If you have speech analytics software available, you can make this task a lot easier.

Transfers And Routing Strategy Person dials a phone number

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How many calls are agents transferring to Tier 2?

Let’s say your AHT is 4 minutes (240 seconds) and 10% of calls are routed to a Tier 2 agent.

Customers spend 2 minutes with a Tier 1 agent, 1 minute on hold while the Tier 1 agent explains the problem to a Tier 2 agent, and 3 minutes with a Tier 2 agent. Total time = 6 minutes.

If that call was routed directly to a Tier 2 agent, he could handle it in 4 minutes. This is a net saving of 2 minutes or 33% on the longest calls in the contact center.

Why not redesign the IVR to route customers with common Tier 2 problems directly to Tier 2?

“Dead Air” Call center employee talks to her manager

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This is when neither side is talking. Customers do not like it because they don’t know what is happening and they are paying for the call.

It’s often caused by slow computer systems or poorly trained agents who are not familiar with the tools or workflows.

It’s worth finding calls with “dead air” and investigating why this is happening. If computer systems are the problem, do they affect all categories of cases or specific cases where specific tools are used?

Can the tools be sped up in some way? Can the process be adjusted so that agents are running the tools while doing something else? Could this category of issues be handled by chat instead of a call, so that agents can handle multiple chats at the same time?

Call Handling Skills Call center employees answer phone calls

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Most contact center agents are nice people. They are trained to be polite to customers. They are not always so good at taking control of a conversation when a customer is upset or simply wants to talk about something else.

Agents need to be assertive to keep the conversation on track. They need to be trained to control the conversation by asking the right questions and not getting drawn into other directions.

Workflow: How Much Can You Reduce Call Length By? Empty call center

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Listen to a selection of your calls. If you reduce the call to the bare minimum of greeting, verification, needs analysis, response, and goodbye, how many seconds will it shave off of the call length?

How will this affect customer satisfaction (CSAT)? How will they react to a shorter, brisker call?

Can Some Calls Be Automated, And What Will That Do To Your AHT/CSAT? Woman in call center talks to a customer on the phone

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Some simple requests can be handled by automated “bots.” Contact center costs are a function of cost per call and call volumes.

If we reduce AHT, we reduce the cost per call.

Automating simple processes will reduce call volumes but may lead to an increase in AHT.

Let’s say we can automate 10% of calls, but this will lead to an increase in AHT by 5%. What is the net effect? Let’s do a “before” and “after” comparison.

“Before”

Assume the cost per call is USD 3.82. (See above)

90 agents normally work at any one time, and each agent handles 50 calls per day.

Total costs per day = USD 17,190 per day.

“After”

Assume the cost per call is USD 4.00 because AHT on human-handled calls has been increased by 5%.

90 agents normally work at any one time, and each agent now handles 45 calls per day.

Total costs per day = USD 16,200 per day.

This is because call volumes have been reduced from 4,500 to 4,050 per day.

This saving of USD 990.00 per day represents 69 employee hours that can be realized by redeploying them to other tasks.

Multiplying this up, savings of USD 990 per day is USD 22,770 per month or USD 273,240 per year.

Over to you!

Are you trying to reduce your AHT? How much can you cut your call length by? Which root cause looks most likely?

Read moreShow lesshow to reduce average call handling time {"customDimensions": {"1":"Executive Community, Liam Anderson","3":"how to reduce average call handling time, aht, how to reduce average handle time, contact centers, call centers, customers, customer service, call center costs, contact center costs, average handling time, average handle time, calls, call handling skills, call cost savings, sales","2":"community","4":"11/15/2022"}, "post": {"split_testing": {}, "providerId": 0, "sections": [0, 544324100, 544398580, 544398581, 479660731, 544398590, 473333499], "buckets": [], "authors": [21030904, 25006587]} } Cover Letter 5 Tips For Getting A Job During The Holidays J.T. O'DonnellJenna ArcandNovember 15, 2022 Woman tries to find a job during the holiday season

Woman tries to find a job during the holiday season

Finding a job during the holidays is no easy task. You have to navigate vacations, slow hiring processes, and increased competition. Yet with the right strategy, it can be done.

Here are five ways you can stand out from the competition this holiday season and find a job before the end of the year.

1. Showcase The Right Skills On Your Resume Hiring manager on laptop reads a resume during the holidays

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Make sure your resume highlights and draws attention to any experience you have in the industry. Look at job descriptions and the core responsibilities of the positions you're applying for. That's where you'll find the skills employers are looking for in job candidates. By including the right skills on your resume, you'll stand out to hiring managers and have a better chance of getting your resume past the ATS. It's all about keywords!

The holidays are hectic, so share with the potential employer how you'll be a positive addition to the team by leveraging your strengths.

2. Dress The Part Well-dressed man interviews for a job during the holidays

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Don't underestimate the power of a great first impression. Dress for the interview in professional attire. Even if the job indicates you'll be wearing jeans and a sweatshirt, you need to show respect for the employer by visiting them in clothes that show you are committed to being seen as one who cares about their appearance and the impact it has on others.

Not sure what to wear? We recommend dressing conservatively in clothing one level above what the current employees at the company are wearing. You want to look professional, but not like you don't fit in with the workplace culture.

3. Show Your Connection To The Company Woman answers an interview question during her holiday job search

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Employers like to hire candidates who have a passion for what they do. Why? Because they know that excitement will translate into better performance.

In your disruptive cover letter (and during your job interview), demonstrate how and why you admire the company. Highlight what you love most about their products and services. Give examples of how you have personally used them in your own life with success. The more you can show them you understand and respect the business, the more likely you'll impress the hiring manager and move forward in the interview process.

4. Demonstrate Your Value Man has a phone interview during the holidays

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It's important to remember that you're a business-of-one, and you're trying to sell the service you provide as a business-of-one to employers (the customers who will be paying you for the service).

To find a job during the holidays, it's critical you adequately demonstrate your value as a business-of-one and potential employee in the hiring process. How? Well, make sure to quantify your work experience on your resume. Use numbers to showcase your accomplishments. Clearly state how you'll make or save the company money with your employment. Do this, and you'll easily become one of the top job candidates for the position.

5. Express Gratitude Woman interviews for a job during the holiday season

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The holidays are busy for everyone. When you're applying for jobs during the holiday season, keep gratitude in mind.

After every job interview, always send a thank-you note. It's just the polite thing to do, and you'll score more points with the hiring manager. Even if you get rejected, or never hear back about a position, make sure you send an email thanking the employer for the opportunity and wish them the best of luck with finding the right job candidate.

Don't be bitter. Be gracious. You never know what will happen in the future. You might want to apply for another job at the company down the line. So, don't let your frustration get the best of you.

Remember: if you get rejected, they didn't say, "No, not ever." They just said, "No, not today."

A successful holiday job search depends on a solid strategy. Follow the guidelines above and land a job this holiday season!

Need more help with your job search?

We'd love it if you signed up for Work It Daily's Event Subscription! Get your career questions answered in our next live event!

This article was originally published at an earlier date.

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How To Prepare An ROI Calculation

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