Formula for ROI
Mukund CRM mukund_ks34@hotmail.com
Member
Posted 18-Mar-2004 06:34 AM
Greetings,
Everytime we talk about CRM it goes hand in hand with ROI. So how does one quantify or measure the ROI. Is there a formula like the ones we have in algebra Smileto calcualate this ROI.What are the factors that we should look at when we need to look at this attribute.
Regards
KS Mukund
CRM System Specialist
mukund_ks34@hotmail.com
Graham Hill
Guru
Member
Posted 19-Mar-2004 01:44 AM
Mukund CRM
There is a standard formula for ROI as used by accountants the world over. You can find a detailed description of the ROI calculation in US GAAP, national GAAP or IASB documents. Alternatively, look in a standard Corporate Finance textbook like Brealey & Myers' 'Principles of Corporate Finance' for a detailed ROI calculation and worked examples.
In a nutshell, ROI for a project is the total net present value of the project's income divided by the total project investment. Standard practice in CRM projects is to measure ROI over 3 years.
The best ROI resource to use is Nucleus Research's ROI calculator, which provides a detailed US GAAP compliant Excel workbook to calculate ROI for a project. They also offer an excellent ROI tutorial online at www.nucleusresearch.com.
Be very careful about using many vendor ROI calculators, or the growing army of vendor 'business consultants' to calculate project ROI. My experience is that they are not independent or financially robust enough to be worth using. Even for free! It is much better to work with an independent management consultant or your company's management accountant to calculate project ROI.
Graham Hill
Independent CRM Consultant
Mukund CRM mukund_ks34@hotmail.com
Member
Posted 19-Mar-2004 11:45 PM
Hi Graham
Thanks a ton! I should say this information was of great help and the site that you had mentioned nucleus.com was brimming with all the info I required. I would like to take this opportunity to thank you on behalf of the entire CRMGuru community for your wonderful help Smile
Regards
KS Mukund
CRM System Specialist
mukund_ks34@hotmail.com
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