"We should automate this" is easy to say. "This automation will save $47,000/year" gets budgets approved. Here's how to build the business case.
The Simple ROI Formula
ROI = (Annual Savings - Implementation Cost) / Implementation Cost × 100But the real skill is accurately calculating those savings. Let's break it down.
Step 1: Quantify the Current State
Before you can calculate savings, you need to measure what you're spending now. For any manual process, document:
- Time per occurrence: How long does this task take each time?
- Frequency: How often does it happen? (per day/week/month)
- Who does it: What's their hourly rate (salary ÷ 2,080)?
- Error rate: How often do mistakes happen?
- Error cost: What does fixing each error cost?
Example: Manual Invoice Processing
| Metric | Value |
|---|---|
| Time per invoice | 12 minutes |
| Invoices per month | 200 |
| Total hours/month | 40 hours |
| Employee hourly rate | $35 |
| Monthly labor cost | $1,400 |
| Annual labor cost | $16,800 |
| Error rate | 5% |
| Errors per month | 10 |
| Cost per error | $50 |
| Annual error cost | $6,000 |
| Total Annual Cost | $22,800 |
Step 2: Estimate Automation Impact
Automation rarely eliminates 100% of work. Be realistic:
- Full automation: No human touch needed → 90-95% time reduction
- Assisted automation: Human review/approval step → 60-80% time reduction
- Hybrid: Complex exceptions need manual handling → 40-60% time reduction
Example: Automated Invoice Processing
| Scenario | Time Reduction | Annual Savings |
|---|---|---|
| Conservative (60%) | 24 hrs/month saved | $10,080 labor + $4,800 errors = $14,880 |
| Moderate (75%) | 30 hrs/month saved | $12,600 labor + $5,400 errors = $18,000 |
| Aggressive (90%) | 36 hrs/month saved | $15,120 labor + $5,700 errors = $20,820 |
Step 3: Calculate Implementation Cost
Include ALL costs:
One-Time Costs
- Development/setup (internal time or consultant fees)
- Software licenses (one-time purchases)
- Integration work
- Training time
- Testing and QA
Ongoing Costs
- Software subscriptions (annual)
- Maintenance and updates
- Monitoring/oversight time
Example: Invoice Automation Costs
| Cost Type | Amount |
|---|---|
| Automation platform (Zapier/Make) | $600/year |
| Development time (20 hours × $150) | $3,000 one-time |
| Training (4 hours × 3 people × $35) | $420 one-time |
| Maintenance (2 hours/month × $150) | $3,600/year |
| Year 1 Total | $7,620 |
| Year 2+ Total | $4,200 |
Step 4: Calculate ROI
Using our moderate scenario:
Year 1 ROI = ($18,000 - $7,620) / $7,620 × 100 = 136%
Year 2+ ROI = ($18,000 - $4,200) / $4,200 × 100 = 328%Payback period: $7,620 ÷ ($18,000/12) = 5.1 months
The Hidden Benefits (Harder to Quantify)
Some ROI doesn't show up directly in the numbers:
- Speed: Tasks that took days now take minutes. What's faster service worth?
- Scalability: Handle 10x volume without hiring. What's that flexibility worth?
- Employee satisfaction: Nobody wants to do repetitive data entry. What's reduced turnover worth?
- Accuracy: No more "sorry, we made an error" emails. What's reputation worth?
- Data quality: Consistent, clean data enables better decisions. What's that worth?
Red Flags: When NOT to Automate
Not everything should be automated. Skip it when:
- Low volume: Task happens less than once/week
- High complexity: Every instance is different
- Unstable process: The process itself changes frequently
- Human judgment critical: The value IS the human touch
- Implementation cost > 2 years of savings: Payback too long
Quick ROI Assessment Questions
Use these to quickly evaluate automation candidates:
- Is this task repetitive and rule-based? (Yes = good candidate)
- Does it happen frequently? (More than weekly = higher ROI)
- Is the current process stable? (Stable = easier to automate)
- Are errors common? (Error-prone = high value automation)
- Does it frustrate your team? (High frustration = adoption will be easy)
If you answered "yes" to 4+ questions, build the business case.
Free ROI Calculator
Want to run these numbers for your specific situation? Use our free automation assessment and we'll help you identify and calculate your highest-ROI automation opportunities.
Need Help Building the Business Case?
Sometimes you know something should be automated but need help making the case to leadership. PeakOps can help you document current costs, estimate savings, and build a compelling proposal.