The average CRM return on investment is $8.71 for every dollar spent. But is this a realistic number that most organizations can expect to attain?
To help you understand how to calculate your CRM return on investment, let’s walk through a scenario with a fictional organization called “Company A”. Company A is a mid-sized SAAS enterprise with 20 CRM users. Let’s see how to calculate their CRM ROI.
How to Calculate First Year CRM ROI
For the purpose of this blog, we will calculate Company A’s ROI after their first year with a CRM system in place.
To calculate CRM ROI for the first year, we will take the net “gain” Company A received in their first year after implementing a CRM and divide it by the total cost of the CRM in year one.
The equation itself is simple. However, the challenging part is calculating your gains and the total price you will pay. So, we’ve created a step-by-step process to help you determine these figures.
In the following sections, we will show you how to calculate:
- The cost of your CRM investment: All of the resources spent to implement, maintain, and optimize your CRM system during its first year.
- The gain from your CRM investment: All of the new revenue generated or money saved because of your CRM implementation within its first year.
- Your final CRM ROI
Step 1: Calculate The Total Cost of Your CRM Investment
Calculating CRM Implementation Costs
In our recent blog, CRM Implementation Costs To Consider, we went through the entire process of calculating what “Company A” could expect to pay for their CRM implementation.
In the blog, we discussed the five stages of CRM Implementation and shared how to calculate the cost for each stage.
The five CRM implementation stages are:
- The planning stage
- The development stage
- The implementation & go-live stage
- The end-user training stage
- The support stage after go-live
After all of our calculations, we estimated a final implementation cost of $19,620 for Company A.
*Please note that CRM implementation costs can vary significantly from organization to organization, depending on various factors.
For more detailed instructions on figuring out your CRM implementation costs, please check out our CRM Implementation Costs To Consider blog.
Calculating Annual CRM Costs
CRM User Subscription Costs
In order to determine CRM ROI in year one, you also need to consider all of the costs of a CRM, even those unrelated to the implementation project.
You will pay an ongoing monthly fee for each employee who uses your CRM. On the low end, you can expect to pay around $30 per user, per month for your CRM subscription costs. However, professional, enterprise-grade CRM solutions can cost upwards of $300 per user per month.
To help you predict what your annual subscription costs would be, find your CRM vendor below.
| CRM Platform | Minimum Cost Per User (USD) | Maximum Cost Per User (USD) |
| Salesforce | $25/Month | $300/Month |
| Zendesk | $49/Month | $215/Month |
| SugarCRM | $40/Month | $150/Month |
| PipeDrive | $12.50/Month | $99/Month |
For Company A, let’s assume they will pay $50 per user, per month. We know that Company A has 20 users, which means they can expect to pay $12,000 total for CRM user subscriptions in year one.
The Cost of Ongoing CRM Support and Management
Your systems and apps will be up-to-date at implementation, but they will evolve over time. Plus, you should be prepared to quickly address unexpected bugs or errors, technology shutdowns, and customers or users who require support.
A service like MasterSolve’s S.M.A.R.T. Managed Services is an affordable option for proactively addressing all of these issues. This solution provides support to help you update, manage, and most importantly, optimize your CRM system.
The cost of S.M.A.R.T. Managed Services varies depending on your organization, but can easily be found using our S.M.A.R.T. calculator. After entering the info for Company A, we come to a monthly cost of $2000. We recommend using the service for at least one year after implementation, so Company A would be looking at a cost of $24,000.
Total CRM Costs in Year One
In year one, your total CRM costs will be calculated by combining your implementation costs, user subscription cost, and ongoing support costs.
Company A paid $19,620 for the implementation project, $12,000 for user subscriptions costs and $24,000 for ongoing support costs. This means their total CRM-related costs in year one would be $55,620.
Step 2: Determine The Total “Gain” of Your CRM Investment
The most accurate way to understand your gains from a CRM implementation is to analyze changes in business metrics that are most impacted by CRM.
There are a few metrics that organizations typically use to calculate CRM ROI, they are:
- Increase in sales revenue
- Increase in revenue per lead
- Increases in marketing and sales funnel conversions
- Employee time savings
- Service representative productivity gains
For the purpose of this blog, we will take a look at determining Company A’s CRM ROI using sales revenue.
Calculating Increases in Sales Revenue
Let’s take a look at the increase in revenue that Company A had due to their CRM implementation. To do this, we will compare the total sales revenue that Company A had in 2019 (before they implemented their CRM) and the total sales revenue they had in 2020 (after they implemented their CRM).
A simple way to calculate the yearly revenue is by using this formula:
Revenue = Number of products or service packages sold x Average price of product or service
Company A sells a workplace chat subscription service at a flat subscription fee of $150 per month for each company. Here is a breakdown of how much they sold in 2019 and 2020:
From the images, we can see that Company A’s revenue grew from $2,700,000 in 2019 to $3,150,000 in 2020. This is a difference of $450,000.
Company A’s increase in sales revenue in year one = $450,000
Step 3: Calculate CRM Return on Investment In Year One
Now that we have determined the total costs associated with the CRM in year one and the total gain of the CRM investment in year one, we can calculate Company A’s CRM ROI for the first year after implementation. Calculator.net has a great ROI calculator you can use if you don’t want to do this calculation yourself.
The formula we will use is:
CRM ROI = [(Increase in sales revenue from CRM investment – cost of CRM investment) / total cost of CRM investment] x 100
Based on their increase in sales revenue, Company A had a CRM return on investment of 709% in the first year after implementation.
This means that Company A made $7.09 for every $1 they spent on their CRM.
Conclusion
Although a CRM can be an expensive upfront investment with costly maintenance fees, it is without a doubt one of the most impactful pieces of technology you can add to your business. Not only does it save your sales team time and energy it also delivers huge boosts to your bottom line.
Ready to look for your new CRM? Speak with our experts!
