ROI or VOI - How to measure your investment
Wednesday, December 03, 2014
By: Sheri Blaho
I have been working on a very complex sale for the past few weeks.
The company is swamped with excessive paper work, manual tasks, and spreadsheets
that backup even more spreadsheets. Additionally they have two systems
that are obsolete. One system is actually an old DOS based application.
After reviewing all their processes, I documented them all and assigned estimated
hours of time that is unnecessary if only they had correct systems and tools in
place. To my surprise, their management team did not feel the Return on Investment
(ROI) was logical even though the team members had confirmed the hours. They
just wanted a price and will buy on cost rather than "return on investment" or
"value to improve."
Compare this to another client that I am working on at the same time. Part
of their business philosophy is what they term Value on Investment, beyond the
typical ROI. Hallelujah! A client that not only "gets
it" but one that embraces financial measurement as part of their overall business
model. They understand that soft dollars and intangibles need to be considered
during any purchase process.
Specifically, they note the impact on employee satisfaction and employee retention.
They understand small things that improve the customer experience contribute to
Whether you are buying ERP software, HRMS software, computer hardware, phone systems
or desks it is important to measure the true value: the value beyond how much it
will contribute directly to the bottom line.
CS3 has embraced a sales methodology for years that does just that.
We examine all business processes and find hard dollar savings
(i.e. how to minimize inventory levels, how to decrease days in AR and how to eliminate
unauthorized overtime). We go to the next step and look for the soft dollar
savings also (i.e. duplicate entry of data into various spreadsheets, providing
information to employees via phone or paper that could be readily made available
online or an email alert.)
The soft dollar or labor savings can free up your staff. That will allow
them to accomplish more work and focus on more strategic activities that will help
your business to grow.
Seem pretty logical.