Demonstrating the return on investment (ROI) of your product is essential–one of the most effective tools to do so is an ROI calculator. However, creating an effective calculator is no easy task. It requires a deep understanding of your product, customer, market, and frameworks for quantifying business value. In this article, we’ll explore four key traits of a high-performing ROI calculator.
Trait 1: Simplicity
Most ROI calculators generate a value assessment to share across teams. If it is filled with technical jargon, it can be difficult for someone without context to understand. It’s like a game of telephone–as the value assessment gets shared, the story gets lost in translation, and the impact of your product is obscured by the time it reaches the budget holders. If the budget holder doesn’t understand the impact, they won't sign off on the purchase. To ensure that the story remains clear and impactful, the value assessment needs to be delivered in a way that's simple and easy to understand. Additionally, a simple calculator ensures that any salesperson or champion–regardless of how experienced they are at value selling–can confidently present the value assessment.
Trait 2: Scenario Analysis
Every buyer evaluates value assessments differently. Some compare the types of benefits–such as risk mitigation calculations versus labor savings calculations–while others prefer to compare conservative and optimistic scenarios of the impact.
There are two ways of addressing this skepticism that we’ve found to be most effective: sensitivity analysis and layering. Sensitivity analysis involves presenting conservative, normal, and optimistic scenarios for the key metrics that your product affects. For example, if you’re calculating the impact Sweep has on speeding up your RevOps team’s work, it could look like this:
This approach is easy to understand and allows you to include or exclude value drivers. However, it can be subjective to determine what the conservative, normal, and optimistic scenarios are, and presenting three numbers for each value driver can be overwhelming. For example, with 5 value drivers, your buyer has 15 numbers to evaluate.
A new approach that we've seen is layering savings, or gradually introducing value drivers. In the conservative scenario, you only include concrete value drivers, such as labor savings, revenue uplift, or savings from tool consolidation. In the normal scenario, you include softer benefits, such as reduced attrition and downtime. In the optimistic scenario, you can include hard-to-quantify impacts of your product, such as an improved team culture or faster data-driven decision making.
When it comes to addressing skepticism in value assessments, sensitivity analysis and layering are two effective approaches. Skepticism from key stakeholders hampers deal progression, and time kills all deals. Addressing skepticism early using these approaches minimizes unanswered questions and accelerates deal velocity.
Trait 3: Don’t Stop at the Spreadsheet
Spreadsheets are the main medium for ROI calculators. They're flexible, easy to share, and there’s no need to install any special software. All you have to do is share the file or, better yet, a link to an online spreadsheet so you can instantly make live changes and collaborate across teams.
However, when it comes to presenting the findings to the C-suite or other decision-makers, spreadsheets aren’t the best medium. It’s critical to have proper accompanying tools, such as a template and automation, to help the sales team create clear and professional content to present the findings. You don't want anything to get lost to interpretation because of a copy-paste mistake or because a bad actor changes the numbers to break your story.
Trait 4: Balance Inputs and Assumptions
At first glance, it seems the ROI calculator is about the ROI it calculates. In some ways, this is actually the least important part. The ROI calculator is most effective as a tool for discovery and creating alignment.
The inputs help sales reps ask the right questions and get champions to think about key metrics. The inputs also help the champion identify gaps in the metrics they track and establish the salesperson as a subject matter expert. The assumptions are usually based on evidence from the industry or your customers. By talking through the assumptions with your prospect, you're able to incorporate them organically into the conversation, help them get a sense of where they are compared to their peers, and provide benchmarks for areas where they’re having challenges.
It's crucial to balance these inputs and assumption elements. Too many inputs can be overwhelming for the prospect and lead to disengagement, so aiming for 5-10 questions tends to be a sweet spot. On the other hand, too many assumptions can lead to a calculator that isn't even close to the prospect's situation, so starting with 40% of the data points coming from the prospect and 60% as assumptions is a good guideline.
There’s a lot that goes into a successful ROI calculator - and building them is my team’s expertise. If you’re interested in an ROI calculator for your company, let’s chat!