For small and medium-sized enterprises (SMEs), the idea of investing in bespoke software can be daunting. At first glance, it might appear as just another expense - one more line on the budget. This perception often leads businesses to hesitate, unsure whether the investment will yield measurable benefits.

But bespoke software is not just a cost. It’s a strategic investment that has the power to streamline operations, boost efficiency, and drive profitability. The key to overcoming this hesitation is understanding the return on investment (ROI) - a clear measure of how software can deliver tangible and intangible benefits to your business.

A Common Starting Point: The Admin Portal

Many businesses begin their software journey with a basic but transformative tool: an admin portal. For example, in the insurance industry, companies that previously managed operations through spreadsheets often adopt a centralised platform for managing customers, invoices, purchase orders, staff, and specific industry regulations. By transitioning to such a system, you can streamline your workflows, reduce errors, and lay the groundwork for scaling their operations.

Identifying the Costs of Bespoke Software

To calculate ROI, you first need to establish the total cost of developing and maintaining the software. This can be broken into two categories: development costs and ongoing costs.

Your development costs are the costs to get your new software live. This might include:

• The cost of designing and developing your new software, including coding, testing, and deployment.
• Hosting costs, servers, and storage requirements to support the software.
• Your licensing fees, subscriptions for third-party tools, APIs, or integrations used within the software.
• Any custom ‘add-ons’ so that the bespoke software meets your exact requirements.

After the launch, ongoing costs are also important to take into account, like:

• Regular maintenance and updates to fix bugs or add features.
• Training to ensure your employees and users are equipped to make the most out of your software’s capabilities.
• Support services that provide technical or customer support for software users.

The total cost of your software investment is the sum of all your development and ongoing costs.

If you’re early in your software development journey, take a look at our pricing page to give you a general idea of how much your project might come to.

Calculating Increased Profit or Cost Savings

Once you’ve calculated how much your software investment will be, the next step is to evaluate the internal benefits of this upgrade to your business. You can think about these benefits in two ways: the increase in profit it will generate or the cost savings it will give you. These might include…

• Revenue growth, such as sales conversions, new customer acquisition, or the ability to upsell products (e.g., offering additional insurance policies through a quoting engine).
• Cost savings like expense reductions due to automation, improved efficiency, or lower error rates.
• Time saved and increased productivity by streamlining workflows and reducing the time spent on repetitive tasks.
• Customer satisfaction and customer retention
• Increased customer lifetime value.
• Avoiding costs associated with hiring additional staff or purchasing new systems.
• Staff satisfaction, retention and reductions in long-term sickness due to stress.
• Improved efficiency as tasks (usually administrative tasks) are completed faster and more accurately.
• Reduction in errors and return rates, saving the company additional expense.

Your total profit or savings is the sum of (or the expected sum of) all of these different factors. Some will be harder to calculate than others but, if you don’t have any data on this now, make some estimates and measure these moving forward.

How to Calculate ROI

As we close the chapter on 2024, our sights are firmly set on an exciting and ambitious 2025. The lessons learned and successes achieved this year have laid a strong foundation for even greater possibilities. We extend our heartfelt thanks to our incredible team, partners, and clients for making 2024 a year to remember. Here’s to building on this momentum and achieving even more together in the year ahead.

So, imagine you’re developing a quoting engine for your insurance business. Beyond simplifying the quoting process, it attracts 200 new customers in its first year. If these customers generate an average of £500 each in revenue, that’s an additional £100,000. Coupled with upselling opportunities (e.g., offering content insurance alongside home insurance), the ROI of your quoting engine could exceed your expectations.

When to Expect ROI

The time it takes to see a return on your software investment depends on several factors, including the software’s complexity and its integration within your business. Generally, SMEs can expect to see measurable returns within 6–12 months after implementation. Larger or more complex projects may require a longer monitoring period, typically 1–3 years. There is no hard and fast rule about this so be sure to discuss this with your software developer before starting a project as they will be able to advise you about specific project expectations.

Conclusion
Bespoke software is an investment that has the potential to deliver significant returns in terms of revenue growth, cost savings, and operational efficiency. By understanding and calculating the ROI of your software, you can confidently embrace technology as a strategic tool for growth. With the right approach, your investment will not only pay for itself but also contribute to your business’s long-term success. If you have any questions about an upcoming project, let’s talk.