markus41/plugins/lobbi-engagement-toolkit/skills/roi-calculator

ROI Calculator

Calculate the financial return on an automation engagement using actual client process data. Produce an ROI summary suitable for executive presentation, including payback period, first-year net benefit, and 3-year NPV.

Step 1: Data Collection

Ask the client the following questions during discovery. Document every answer — do not estimate figures that can be collected.

Current process data:

1. Who performs this process?

   • Role/title: [e.g., CSR, Loan Processor, Underwriter]
   • Fully-loaded hourly cost (salary + benefits + overhead): $[X]/hour
   • If unknown: use industry benchmarks (CSR: $35–45/hr fully loaded; Loan Processor: $45–60/hr; Underwriter: $60–85/hr)

2. How often does the process occur?

   • Frequency: [N] times per [day / week / month]
   • Convert to annual: [N] × [frequency multiplier] = [annual volume]
   • Seasonal variation: note if volume peaks (e.g., renewal season, year-end)

3. How long does one instance take?

   • End-to-end time: [N] minutes per instance
   • Include: setup, execution, review, documentation, follow-up communications
   • Exclude: time spent waiting for external responses (unless staff is blocked)

4. What is the error rate?

   • Percentage of instances that result in an error requiring correction: [X]%
   • Time to identify and correct one error: [N] minutes
   • Who performs the correction (same role or escalation?): [role]

5. Are there additional costs?

   • Overtime or temporary staff costs from process volume: $[X]/year
   • Vendor fees paid per transaction for manual process: $[X] × [annual volume]
   • Compliance penalties or rework from errors (if tracked): $[X]/year
   • Customer attrition attributable to process delays (if estimable): $[X]/year

6. What percentage of the process will automation handle?

   • Straight-through processing rate (no human intervention): [X]% (typical range: 60–90%)
   • Exception rate requiring human review: [100-X]%
   • Time for human review of exceptions: [N] minutes each

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Step 2: Current Annual Cost Calculation

Calculate the total annual cost of the manual process.

Manual labor cost:

Annual volume = [frequency per period] × [periods per year]
Hours per instance = [minutes per instance] / 60
Annual hours = annual volume × hours per instance
Annual labor cost = annual hours × fully-loaded hourly rate

Error and rework cost:

Annual errors = annual volume × error rate (decimal)
Annual rework hours = annual errors × (correction time in minutes / 60)
Annual rework cost = annual rework hours × hourly rate of correction staff

Additional costs:

Annual additional costs = overtime/temp + vendor transaction fees + penalties + attrition

Total annual cost of manual process:

Total = annual labor cost + annual rework cost + annual additional costs

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Step 3: Automation Savings Calculation

Labor hours recovered by automation:

Straight-through volume = annual volume × straight-through rate
Hours recovered from straight-through = straight-through volume × (minutes per instance / 60)

Exception volume = annual volume × exception rate
Hours recovered from exceptions = exception volume × ((minutes per instance - exception review time) / 60)

Total hours recovered = hours recovered from straight-through + hours recovered from exceptions
Annual labor savings = total hours recovered × hourly rate

Error reduction savings:

Automation error rate (assume 0.1% for well-designed systems, vs. current [X]%)
Remaining annual errors = annual volume × 0.001
Rework hours saved = (annual errors - remaining annual errors) × (correction time / 60)
Annual error savings = rework hours saved × hourly rate

Additional cost savings:

Eliminated overtime/temp: $[X]/year
Eliminated per-transaction vendor fees: $[X] × straight-through volume
Annual additional savings = sum of eliminated costs

Total annual savings:

Total annual savings = annual labor savings + annual error savings + annual additional savings

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Step 4: ROI Calculation

Project investment:

Total project fee: $[Investment]
Ongoing annual cost (maintenance, hosting, licensing): $[Annual ongoing]
Year 1 total cost: Project fee + annual ongoing
Year 2–3 total cost per year: Annual ongoing only

ROI metrics:

| Metric | Formula | Value | |--------|---------|-------| | First-year net benefit | Total annual savings − Year 1 total cost | $[X] | | First-year ROI | (Net benefit / Year 1 total cost) × 100 | [X]% | | Payback period | Year 1 total cost / (Total annual savings / 12) | [N] months | | Year 2 net benefit | Total annual savings − Annual ongoing | $[X] | | Year 3 net benefit | Total annual savings − Annual ongoing | $[X] | | 3-year cumulative savings | Sum of year 1–3 savings | $[X] | | 3-year total cost | Year 1 cost + (Year 2+3 ongoing × 2) | $[X] | | 3-year NPV (10% discount rate) | NPV formula below | $[X] |

3-year NPV calculation:

Discount rate: 10% (standard corporate hurdle rate)
Year 1 net cash flow: total annual savings − year 1 total cost
Year 2 net cash flow: total annual savings − annual ongoing
Year 3 net cash flow: total annual savings − annual ongoing

NPV = Year1_CF / (1.10)^1 + Year2_CF / (1.10)^2 + Year3_CF / (1.10)^3

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Step 5: Sensitivity Analysis

Show how ROI changes if key assumptions vary. Helps the client see the floor.

| Scenario | Assumption Change | Annual Savings | Payback Period | |---------|------------------|----------------|---------------| | Base case | As collected | $[X] | [N] months | | Conservative (-20%) | 20% lower volume or savings rate | $[X] | [N] months | | Optimistic (+20%) | 20% higher volume or straight-through rate | $[X] | [N] months | | Break-even | Minimum savings to achieve 24-month payback | $[X] | 24 months |

Break-even volume: The minimum annual transaction volume at which the project pays back within 24 months:

Break-even annual savings = Year 1 total cost / 2
Break-even volume = break-even annual savings / (savings per transaction)

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Step 6: ROI Summary Output

Produce a one-page ROI summary for executive presentation:

[Client Name] — Automation ROI Summary

| | Current State | Automated | |--|--|--| | Annual process volume | [N] transactions | [N] transactions | | Manual hours per year | [N] hours | [N] hours (exceptions only) | | Annual labor cost | $[X] | $[X] | | Annual error cost | $[X] | $[X] | | Total annual cost | $[X] | $[X] |

Investment and Return:

| | | |--|--| | Project investment | $[Amount] | | Annual ongoing cost | $[Amount] | | Annual net savings | $[Amount] | | First-year ROI | [X]% | | Payback period | [N] months | | 3-year NPV | $[Amount] |

Based on [volume] transactions/year at $[rate]/hour, [X]% automation rate, and [X]% current error rate. Actual results may vary.

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Notes on Data Quality

• If the client cannot provide actual hours or volume data, use a documented benchmark source and note the assumption
• Never fabricate figures — an overestimated ROI that fails to materialize destroys trust
• If the payback period exceeds 24 months at base case, have an honest conversation before proceeding with the proposal
• Recurring costs (hosting, licensing, support retainer) must be included — they reduce the ongoing savings
• If the client's fully-loaded hourly rate is unknown, use the midpoint of the role benchmark range and document it