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.