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When calculating ROI, be sure to annualize the savings

We all know that ROI = return on investment. When considering any investment, we should consider what the return on that investment will be. So if I’m going to spend $100,000 on a new database, for example, what kind of return can I expect on that $100,000?

That’s a good exercise to run through. But too often, ROI is often calculated against immediate savings, and annualized savings are overlooked. Here’s an example:

A client of mine invested $125,000 in a new association management system. As a result of this change, they were able to dramatically reduce the number of snail-mail pieces they sent out for dues renewals by sending email renewal messages and allowing members to renew online. The savings for one year of reduced snail-mail was $13,000. That’s not a huge number, compared to the $125,000 investment. However, over five years, the association will have saved $65,000 on printing and postage. Suddenly the ROI looks a lot better!

So when calculating savings that may occur as a result of some investment, be sure to take into consideration whether that is a one-time savings or savings that can be annualized for years to come.

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Testimonials

“Wes was able to come in and offer tangible, relevant advice that made us more productive immediately. I value his understanding of databases but more so, his understanding of how nonprofits work. There was no lost time educating him about how membership organizations are “different.” Wes recommended changes in processes as well as tips and tricks that were easy to implement made an immediate positive impact.”

Mary Pat Paris, Executive Director
International Registration Plan

“We came to Wes because we were very frustrated with our existing AMS and we wanted to improve our capabilities as soon as practicable. Wes very quickly helped us through a process of identifying our needs, identifying potential vendors, and selecting a new system that we’ll be able to move into very quickly. I especially appreciated Wes’s candor about our processes as well as the systems we were looking at. He was a great resource to have in a period of high anxiety for our organization. I would highly recommend Wes for any similar project.”

Jack Chiasson, CMP Executive Director
National Association of Life Brokerage Agencies

“Wes was able to come in and offer tangible, relevant advice that made us more productive immediately. I value his understanding of databases but more so, his understanding of how nonprofits work. There was no lost time educating him about how membership organizations are “different.” Wes recommended changes in processes as well as tips and tricks that were easy to implement made an immediate positive impact.”

Mary Pat Paris, Executive Director
International Registration Plan

Mary Pat Paris
International Registration Plan

“This is the second database implementation we’ve done since I have been at Western Arts Alliance (WAA). The first I did on my own. This time we engaged Wes Trochlil as our database planning consultant. Let me tell you, this process is a whole lot easier having Wes on your team! For a small association like WAA, it’s tempting for board and EDs to question the justification and expense of a database planning consultant. But it’s the small associations that need Effective Database Management the most. Wes strengthened our planning process, clarified our needs requirements, helped us steer around solutions that couldn’t meet our objectives, and saved us money in the long haul.”

Tim Wilson, Executive Director
Western Arts Alliance

Tim Wilson
Western Arts Alliance
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