How to Increase Return on Investment with Automation
It’s no secret that automation can significantly improve your company’s overall productivity. Unfortunately, many business owners don’t understand as much as they should about incorporating this technology.
Similarly, employees might be afraid that automation software will completely replace them. The truth is, however, that automation provides a significant return on investment (ROI) and should be capitalized on as much as possible.
Not sure where to start? Don’t worry, we’ve got you covered. Let’s take a look at everything you need to know.
What is automation?
Automation refers to the process of actively minimizing the amount of human input in a given workflow. For example, chatbots on a company website are a common automation tool that answers common user questions and frees up a lot of time for support teams.
There’s a lot of different types of automation that businesses can incorporate, such as:
- Basic automation: This involves using software to complete simple, straightforward tasks, such as sending messages, scheduling meetings, sending notifications once certain metrics are reached, etc. This type of automation can provide a drastic increase in productivity despite only managing everyday tasks, as it allows employees to focus more on their core responsibilities.
- Workflow automation: Although relatively similar to basic automation, workflow automation focuses on automating a sequence of tasks. For example, when a customer submits a help ticket for your company, you can use workflow automation to route this ticket to the right support specialist to assist this customer. You can also add a due date for the ticket and send an automated reply to the customer to let them know their request is being processed.
- Email automation: This allows you to automate email sequences to customers or other stakeholders based on a series of conditions. For example, if a customer just completed their first purchase with you or signed up for your newsletter, you can send them a series of welcome emails with important and useful information.
How automation can impact ROI
One of the biggest obstacles that businesses face when deciding whether or not to incorporate automation software – and which software is the best fit for them – is determining how to measure their ROI. Since automation can provide such a wide range of results, it can be difficult to assess its concrete value.
One of the reasons for this is because automation can yield two different kinds of ROI: hard ROI or soft ROI.
Hard ROI can be objectively measured, so you can specifically determine how much time and/or money you can save with automation. Common examples of hard ROI include how much time you’re able to save per task, the money you save from increasing the speed of your business processes, and how much work you’re able to complete within a given period.
For instance, you could measure hard ROI by observing that a chatbot on your website saves each customer service rep about two hours per day by answering visitors’ most common questions before they need to reach out to your team.
In contrast, soft ROI attempts to measure less tangible benefits that you get from deploying automation. As such, it’s more difficult to quantify.
For example, automating mundane tasks such as content publishing might not save you a significant amount of time each day, but it may let your employees focus on the more rewarding parts of their work. This can improve their job satisfaction and help them better understand how their role impacts the company, which, in turn, may result in a higher level of productivity that leads to increased revenue.
Automation can also significantly increase customer satisfaction by speeding up key processes and communications – and keeping your customers happy is key to make them stay with you in the long run. After all, customer retention can boost your ROI too: a 5% increase in customer retention can increase a company’s profitability by up to 75%.
How to measure ROI from automation
When measuring ROI, it’s recommended to look at a period of at least a few months so that enough time has passed for you to have an accurate view of your results. You can’t expect to get a full return on your investment within a few weeks of implementing automation software.
With this in mind, here are 4 steps to measure the ROI you get from automating business processes.
1. Determine the cost of your process
In order to get the best understanding of the ROI you get from automation, you will need to figure out how much a given workflow or process costs without using any automation at all.
Let’s assume that you want to figure out how much it costs your company to manage its files. First, you would determine how many employees are responsible for this process and how long it takes each of them to complete it during a specific window of time (such as a week or month).
You can then use this value to formulate an objective cost. While this is easier for hourly-wage employees, it’s still possible with full-time workers. If needed, you can find their average hourly rate by dividing their annual salary by 52 (weeks per year) and then again by 40 (for full-time work). So, an employee with a $60,000 annual salary would have an hourly rate of about $28.
If it takes this person 5 hours per week to complete this process, then you can work out that 5 hours per week x $28/hour = $140/week. That’s how much it costs for this person to complete this process every week.
Since we’re focusing on the annual cost of the process, you can then multiply this amount by 52. So, if file organization tasks cost your business $140 per week, it would cost $7,280 per year ($140 x 52 weeks).
2. Calculate the time and/or money you save
After you figured out how much money your company spends annually on a particular process, you’ll then factor in how much time and money your company is able to save by automating this process.
This calculation is nearly identical to the previous one. However, instead of calculating the time it takes your company to complete a task without automation, you’ll use the time it takes with it.
You may find that the automation software you deployed saves your employee three hours per week. So, using the figures above, your employee now only needs to spend two hours per week on this task. 2 hours x $28/hour = $56/week. Then, to figure out the annual cost: $56 x 52 = $2,912/year.
But you also need to incorporate the cost of the automation software and its integration. Otherwise, you may end up with an inaccurate result. You can simply add this cost (or estimated cost) to the results you get (annual cost + automation cost). For example, if the software you want to use costs $2,000 per year, your total cost will be $2,912 + $2,000 = $4,912/year.
3. Figure out your savings
The third step is pretty straightforward. To define your annual savings for this particular process, you simply need to subtract the result in step 2 from the result in step 1. That would be $7,280 – $4,912 = $2,368 per year.
4. Determine your ROI
In order to properly calculate your ROI, all you need to do is divide the value of your savings by the cost of your automation software and its implementation. Then, you multiply this number by 100 in order to get a percentage.
So, if you save $2,368 annually and your software costs $2,000, this calculation would be $2,368 / $2,000 x 100 = 118% ROI.
From here, you’ll be able to determine whether or not automating these processes is worth the money you need to spend.
How to implement business automation
Although implementing automation comes with a large number of tangible benefits, it can be difficult to think about how you can put it to practice – especially if you think that automation would make things too complex, or that the software you’d need would be too expensive.
However, even automating simple processes provide enough benefits to make them worth pursuing; and, with so much choice in the market, you’re sure to find a tool that fits your budget.
Here are some examples of areas in your business you can automate to get the highest ROI from automation.
Customer service
Automating customer service responsibilities can help your audience find the information they need and resolve their problems much more quickly and efficiently.
More often than not, a customer’s reasons for looking for help (such as checking a balance or paying a bill) are quite simple, so it’s easy to predict what they are and implement automation software to answer these questions immediately. This means that your service reps can dedicate more time to more complex queries. The result? Happier customers and nimbler customer service teams.
Marketing
Marketing is one of the easiest areas to automate in a business. From automating email sequences to sending personalized product recommendations and sprucing up your lead gen, there’s a huge field of possibilities to automate your marketing processes. This can drastically increase your marketing team’s results and productivity – and it doesn’t have to break the bank.
Document signing
Coordinating all of the necessary signatures on a document can be time-consuming. This is particularly true for extensive agreements, documents that concern sensitive information, or agreements that involve a large number of parties.
Luckily, automation software will allow you to take care of this task as quickly as possible. One of the most common use cases involves sending automatic alerts to every party involved whenever their signatures are required. Once all the signatures in a particular document have been obtained, an alert can then be sent to the appropriate party in order to move forward with the process.
Employee hiring
To facilitate more efficient employee hiring, automation software can screen applications to look for any red flags that would disqualify applicants based on preset conditions – or flag candidates that might be a good match for the role.
Additionally, you can also use automation to look for particular attributes in order to segment applicants into groups. For large companies, this can save a substantial amount of time and effort in recruitment.
You can also use automation to notify candidates that their application has been received, if they’ve moved forward to the next stage, and to send them any relevant information about their application and the selection process.
