Software ROI Calculator
Estimate the payback period and multi-year return on a piece of custom software before you commit budget. Enter how much time it saves, how many people use it, and what it costs to build and run.
How it works
This software ROI calculator turns saved time into money and compares it against what the software costs to build and run. It starts with the value of the hours the tool gives back each week, projects that over your chosen horizon, then subtracts every cost so you can see when the investment breaks even.
The annual value of saved time is the number of people using the software multiplied by the hours each one saves per week, the fully-loaded hourly cost of that time, and 52 weeks. Payback period is the build cost divided by the monthly net benefit, that is, the annual value of saved time minus the annual running cost, spread across twelve months. Return on investment is the net gain over the horizon divided by the total cost.
Use a fully-loaded hourly rate rather than base salary, since real labour cost includes benefits and overhead, and keep a running-cost line for hosting, support and maintenance. As a rule of thumb, ongoing maintenance runs around 15-20% of the build cost each year.
payback (months) = build cost ÷ ((people × hours/week × wage × 52 − annual run) ÷ 12)
Once you have a payback figure, pressure-test the build cost with the software development cost calculator, or weigh a custom build against an off-the-shelf tool with the build-vs-buy calculator.
FAQs
What is a good ROI for custom software?
There is no single benchmark, but most teams look for the build to pay for itself within the first one to two years, with a positive multi-year return after that. A payback period under twelve months is a strong signal; anything longer than your planning horizon usually means the scope is too large for the value it creates.
How do I calculate the value of hours saved?
Multiply the number of people who use the software by the hours each saves per week, then by a fully-loaded hourly cost and 52 weeks. The fully-loaded rate should include benefits and overhead, commonly 1.25 to 1.4 times base wage, because that is the real cost of the time you are freeing up.
Should I include running costs in the ROI?
Yes. Hosting, support and maintenance are real ongoing costs and they reduce the net benefit every year. This calculator subtracts the annual running cost from the value of saved time before working out payback and return, which keeps the estimate honest rather than flattering.