How to calculate ROI of construction project management software

Before investing in a construction project management application, you need to understand the potential return on investment (ROI) of your new purchase. The problem is, most people have no idea how to calculate ROI. The purpose of this post is to help identify factors you can use in your calculations.

As a child, I watched my mom do almost everything she could to save a dollar. We would shop at used clothing stores and drive halfway across town to save 10¢ on a gallon of gas. As I grew up and started my first jobs, I started to better understand the importance of stretching a dollar and the benefits of saving money. But with age and the opportunity to buy my own things, I also learned that saving money was actually costing me more in the long run. 

The same principle is applied when considering construction project management software. You may feel like you're saving money by using home-grown Excel spreadsheets but you are more likely wasting money in unorganized documentation, inefficient use of your employees, and duplication of tasks. In a 2019 G2 State of Software Happiness report, around 52% of employees said they are unhappy at work because of the software tools they're using. Even worse, around 25% of employees said the software they're using has made them consider looking for another job.

Before getting into the numbers, let's review a few topics to consider when thinking about investing in new software.

Recruiting new hires

"You're only as good as the tools you use" is a saying that has been around for many years and highlights the importance of using the correct tools or software for the job. When people are looking for new companies to work for, a common question asked in interviews is about software and modern tools. Appropriate software tools show the potential hire that you're serious about investing in your employees and demonstrates good organization of your processes. 

Team productivity

Being unproductive during work isn't good for anyone. As companies' usage of technology and software grows, it’s playing an increasingly larger role in the working life of an average employee – affecting happiness, job satisfaction, and productivity. Referring back to that G2’s recent State of Software Happiness Survey, 62.1% of respondents stated that they aren’t reaching their full potential at work due to a mismatch of SaaS tools, and 96.4% of respondents stated that they would be more satisfied (happier) at work with access to better software. 95% of employees agree that the right software tools make them more productive at work.

Company direction

Before investing in new software, it's a perfect time to reflect on who your company is now and what they want to be in the future. Everything you do as a company adds to your brand and how others perceive you. Is outdated and inefficient software the image you want to portray? Modern and flexible platforms such as ProjectTeam.com allow you to evolve your business year after year by keeping up with trends and best practices. When you invest in a system, you are also joining a community of others that you can leverage to build better business practices.

Now, let's get into the numbers. At a high level, calculating the ROI of software should be a simple evaluation:

To define "current value of investment" you can estimate at least one hour saved per working day, or around 5 hours per week (in reality, the right project management software should save more than 5 hours a week, but 5 is a good starting point). According to Glassdoor, the average base salary for a Construction Project Manager is $99,500. Assuming 2,000 working hours in a year, that means the average hour of time is worth $49.75. 

5 times $49.75 equals $248.75 saved per week. $995 saved per month. $11,940 saved per year. That means a team of 10 should expect to save around $119,400 per year. 

The per user price of ProjectTeam.com is $700 billed annually. A team of 10 people would cost around $7,000 for the year. Plugging those numbers back into the equation:

• Current value of investment = $119,400
• Cost of software (10 users) = $7,000

($119,400 - $7,000) / $7,000 = 16.05 or 1,605%

That's a return on investment of over 1,000%. Of course, your use case may be slightly different from the numbers provided above, but no matter how you look at it, ROI like that is very good! At the very least, this exercise should help you understand that investing in software is a positive for your business and it's actually very hard to lose money by moving forward with the right solution.

The bottom line is that construction project management software will help your business save time and money and those savings will multiply over the years as your team members become more proficient in the system.