How to use the Software ROI Calculator
This calculator estimates how long a piece of custom software takes to pay for itself and what it returns over three or five years. It values the hours the software saves at your hourly cost, subtracts the yearly running cost, and compares the result with the build cost. Use it to sanity check a build before you commit budget, or to compare two scopes side by side.
Step by step
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Enter how many people use it
Type the head count in People who use it. The default is 10, and anything below 1 is counted as 1. Count only the people whose weekly hours the software actually gives back.
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Set the hours saved
Drag the Hours saved per person / week slider between 0.5 and 40 hours in half hour steps. It starts at 5 hrs. Use the average saving per person, not the best case.
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Add the cost of that time
Enter the Fully-loaded hourly cost in dollars. The default is $45. Fully loaded means salary plus benefits and overhead, which the field hint puts at 1.25 to 1.4 times base wage.
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Enter the build and running costs
Type the Estimated build cost (default $120,000) and the Annual running cost for hosting, maintenance and support (default $20,000). The hint suggests running costs of 15 to 20 percent of the build per year.
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Pick the time horizon
Choose 3 yrs or 5 yrs under Time horizon. The default is 5 yrs. It sets the period for the ROI, the net gain and the bars, and it decides whether payback is shown in months or years.
Reading the result
- Payback period is the build cost divided by the monthly net benefit, which is the yearly value of saved time minus the running cost, over 12. With the defaults that is $120,000 divided by about $8,083, or about 14.8 months, which shows as 15 months.
- The line under it shows the yearly value of saved time: 10 × 5hrs × $45 × 52 = $117,000/yr with the defaults.
- The ROI card is the net gain over the horizon divided by the total cost. With the defaults the 5 year value is $585,000, the total cost is $220,000 (build plus five years of running), the net is $365,000 and the ROI is 166%.
- The colored box gives a verdict: Strong case when payback is 12 months or less, Pays back within your horizon when it lands inside 3 or 5 years, and Payback is longer than your horizon after that. When the running cost is as high as or higher than the value of the time saved, the headline reads No payback and the box says It does not pay for itself.
- The two bars compare the total value of saved time with the total cost over the horizon. When the value bar is longer, the build earns more than it costs.
Tips and common mistakes
- Be honest about hours saved. A small change there moves every number, so try a cautious figure as well as your hoped for one.
- Do not set Annual running cost to zero. Every piece of software needs hosting, fixes and updates, and leaving it out flatters the payback.
- The months and percentages are rounded to whole numbers on screen, so treat them as estimates rather than exact figures.
- If the result says Payback is longer than your horizon, try a smaller first version: a lower build cost shortens payback directly.
- The calculator counts saved time only. Extra revenue, fewer errors or lower software license fees are not included, so add them separately if they apply.
Privacy and limits
All the math runs in your browser. The numbers you enter are not sent anywhere or saved, and the defaults come back when you reload the page.
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. If building wins, our shortlist for the best custom software development company in USA scores nine firms on scope, ownership and support.
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.
