Most teams evaluate automation with gut feel: "This seems like a lot of manual work, we should automate it." That intuition is useful, but it's not enough to prioritize projects or secure buy-in.
A simple ROI model helps you:
- Compare multiple automation ideas.
- Decide what to do now versus later.
- Align stakeholders on what "success" looks like.
Use this back-of-the-napkin calculator to evaluate automation ideas before you invest time or capital.
Step 1: Gather your inputs
You don't need perfect data. Reasonable estimates are enough to make directional decisions.
Inputs
- Volume (per month) – Number of requests, tickets, or tasks today.
- Time per unit – Average minutes per request (including all touches).
- Fully loaded hourly rate – Salary + benefits for the humans doing the work.
- Automation coverage % – Portion of the workflow AI can handle end-to-end.
- Quality lift % – Expected reduction in rework or errors due to automation.
- Build + operate cost – Estimated monthly cost to run the automation (amortized build + ongoing tools/services).
Document these in a simple spreadsheet for each candidate workflow.
Step 2: Apply the formulas
Once you have your estimates, plug them into this model.
Formula
Labor cost saved =
volume * time per unit / 60 * rate * automation coverage
Quality savings =
labor cost saved * quality lift
Monthly ROI =
(labor cost saved + quality savings - build cost) / build cost
A few notes:
- Labor cost saved reflects the time you no longer have to pay for directly.
- Quality savings capture reduced rework, fewer errors, and less "fixing" time.
- Build cost should include internal time, vendor fees, and infrastructure, averaged per month over a reasonable period (often 12–24 months).
Step 3: Interpret the results
Once you've calculated the monthly ROI, you can derive a simple payback period:
Payback period (months) =
build cost / (labor cost saved + quality savings)
As a rule of thumb:
If the monthly ROI is above 50% and the payback period is under 6 months, then the initiative is usually worth green-lighting.
If the numbers are weaker, it doesn't always mean you should abandon the idea. It might mean:
- The scope is too broad or too complex for a first phase.
- Your automation coverage estimate is too aggressive or too conservative.
- There are intangible benefits (compliance, risk reduction, employee experience) that aren't fully reflected in the model and should be discussed explicitly.
Step 4: Compare and prioritize
Use the same structure for multiple ideas:
- Automating a support queue.
- Streamlining invoice processing.
- Simplifying onboarding steps.
- Enhancing data entry or reconciliation.
When every candidate has:
- The same inputs,
- The same formulas, and
- The same thresholds,
prioritization becomes a rational discussion instead of a debate driven by whoever is loudest.
Step 5: Revisit after implementation
An ROI calculator is not just a pre-project tool; it's also a post-project reality check.
After you implement automation:
- Re-measure volume, time per unit, and quality lift.
- Compare actual results to your original assumptions.
- Adjust your future estimates up or down accordingly.
Over time, your ROI assumptions become more accurate, and your automation roadmap becomes less risky and more credible.