ROI of Automation: A Framework for Measuring Impact

“Should we automate this?” is the wrong question.

The right question is: “What’s the return on automating this vs. other options?”

Here’s a framework for making that decision.

The Automation ROI Formula

ROI = (Time Saved × Hourly Cost × Frequency) - (Build Cost + Maintenance Cost)
     ────────────────────────────────────────────────────────────────────────
                          Build Cost + Maintenance Cost

Let’s break this down.

Step 1: Calculate Time Saved

Be honest about current time spent:

Task	Time per instance	Frequency	Monthly hours
Invoice processing	15 min	200/month	50 hrs
Lead data entry	5 min	100/month	8.3 hrs
Report generation	2 hrs	4/month	8 hrs

Don’t forget hidden time:

• Context switching
• Error correction
• Training new employees
• Waiting for responses

Step 2: Assign Dollar Values

Calculate the true hourly cost:

Hourly Cost = (Salary + Benefits + Overhead) / Working Hours

For a $60K employee:

• Benefits (30%): $18K
• Overhead (20%): $12K
• Total cost: $90K
• Hourly: $45/hr

Now multiply:

Task	Monthly hours	Hourly cost	Monthly value
Invoice processing	50 hrs	$45	$2,250
Lead data entry	8.3 hrs	$45	$374
Report generation	8 hrs	$45	$360

Step 3: Estimate Build Costs

Be realistic about development time:

Factor	Multiplier
Simple API integration	1x estimate
Multiple system integration	2x estimate
Custom logic required	2.5x estimate
AI/ML components	3x estimate

Include:

• Development time
• Testing
• Documentation
• Training
• Integration work

Step 4: Factor in Maintenance

Automation isn’t “set and forget”:

• Simple automations: 5% of build cost/year
• Medium complexity: 10-15%/year
• Complex systems: 20-30%/year

Step 5: Calculate Payback Period

Payback Period = Build Cost / Monthly Value

Example for invoice processing:

• Build cost: $5,000
• Monthly value: $2,250
• Payback: 2.2 months

The Priority Matrix

Plot your automation candidates:

                    HIGH VALUE
                        │
     Quick Wins         │         Strategic
   (Do immediately)     │     (Plan carefully)
                        │
 ───────────────────────┼───────────────────────
                        │
    Don't Bother        │      Nice to Have
   (Skip or defer)      │    (Low priority)
                        │
                    LOW VALUE
         LOW EFFORT              HIGH EFFORT

Beyond Time Savings

Some benefits are harder to quantify:

Quality improvements:

• Fewer errors
• Consistent output
• Better compliance

Employee satisfaction:

• Less boring work
• Focus on high-value tasks
• Reduced burnout

Scalability:

• Handle 10x volume without hiring
• Faster response times
• 24/7 operation

Assign rough values:

• Error reduction: Cost of fixing × frequency
• Scalability: Cost of hiring × growth rate
• Satisfaction: Turnover cost × reduction %

Red Flags to Watch

Don’t automate if:

1. Process is still evolving - Wait until it’s stable
2. One-time task - Manual is fine
3. Requires constant judgment - Hybrid approach needed
4. Political implications - People may resist

Real Example

A client wanted to automate customer support email routing:

Current state:

• 500 emails/day
• 3 min each to route
• $45/hr cost
• Monthly value: $3,375

Automation cost:

• Build: $8,000
• Annual maintenance: $1,200

ROI calculation:

• Year 1 savings: $40,500 - $8,000 - $1,200 = $31,300
• ROI: 391%
• Payback: 2.4 months

Decision: Obvious yes.

Your Action Items

1. List your top 10 repetitive tasks
2. Calculate time and cost for each
3. Estimate build costs (be conservative)
4. Plot on the priority matrix
5. Start with Quick Wins

---

Need help identifying automation opportunities? Book a free audit.