How to Calculate the ROI of Your Tech Stack (A Step-by-Step Guide)

Every month, the credit card hits: CRM subscription, email hosting, project management tool, cloud storage, security software.

For many business owners, technology feels like a black hole—a necessary expense where money goes in, but you aren't quite sure what comes out. You think it helps, but can you prove it?

If you can’t quantify the value of your technology, you are likely overspending on tools you don't use and underinvesting in the tools that actually drive profit.

It’s time to stop guessing. Here is a step-by-step guide to auditing your tech stack and calculating the real Return on Investment (ROI).

Step 1: The "Zombie Hunt" (Inventory)

You cannot calculate the ROI of a mystery. The first step is to audit exactly what you are paying for.

• The Audit: Pull your bank statements and credit card bills for the last 12 months.

• The List: Write down every piece of software, hardware lease, and IT service fee.

• The Usage Check: Ask your team: "When was the last time you logged into this?"

You will almost certainly find "Zombie Subscriptions"—tools you stopped using 6 months ago but are still paying for.

• Action: Cancel the zombies immediately. Your ROI on these is -100%.

Step 2: Calculate Total Cost of Ownership (The "I")

The "Investment" (I) part of ROI isn't just the monthly subscription fee. You need the Total Cost of Ownership (TCO).

For each major tool, add up:

1. License Cost: The annual fee.

2. Implementation Cost: Did you pay a consultant to set it up?

3. Training Cost: How many hours did your team spend learning it? (Hours x Hourly Wage).

4. Support/Maintenance: Are you paying IT to keep it running?

• Example: A CRM costs $5,000/year. But you spent $2,000 setting it up and 20 hours ($1,000) training staff. Your Investment is $8,000.

Step 3: Quantify the "Hard" Returns (The "R")

This is the tangible money the tool brought in. This is easiest for sales and marketing tools.

• Revenue Generation: Did this email marketing tool directly lead to $20,000 in sales?

• Cost Reduction: Did this accounting software allow you to fire your $500/month bookkeeper?

• Example: That CRM helped you close 3 extra deals worth $15,000. Your Hard Return is $15,000.

Step 4: Quantify the "Soft" Returns (Efficiency & Risk)

This is where most businesses get lazy, but this is where the real value lies. You must convert "time saved" into dollars.

• The Efficiency Formula: (Hours saved per week) x (Weeks per year) x (Employee Hourly Rate) If a project management tool saves a project manager ($50/hr) just 2 hours a week of administrative sorting, that is: 2 x 50 x $50 = $5,000/year in soft returns.

• The Risk Calculation: What is the cost of not having it? (e.g., Backups or Security). (Cost of a Data Breach) x (Probability of it happening). If a cyberattack costs $100k, and your firewall reduces the risk from 10% to 1%, the value is massive. Treat this like an insurance policy.

Step 5: The ROI Formula

Now, do the math for each tool.

((Total Returns - Total Cost) / Total Cost) x 100 = ROI %

• The CRM Example:

  • Total Returns ($15,000 Sales + $0 Efficiency) = $15,000

  • Total Cost ($8,000)

  • ($15,000 - $8,000) = $7,000 Net Gain

  • ($7,000 / $8,000) = 87.5% ROI

The Verdict: Keep it. It’s making you money.

• The "Zombie" Tool Example:

  • Returns: $0

  • Cost: $1,000

  • -100% ROI

The Verdict: Kill it.

The "Kill, Keep, or Optimize" Decision

Once you run this math, you will have three piles:

1. High ROI (Keep): These are your profit engines. Can you invest more here to get even better results?

2. Negative ROI (Kill): These are drains. Cancel them.

3. Low/Breakeven ROI (Optimize): This tool should be working, but it isn't. Do you need more training? Is it set up wrong? Or is it the wrong tool?

Technology is an investment portfolio. If an asset isn't performing, dump it. If it is, double down.