How to Estimate ROI for EHS Software
If you want to convince your boss to buy EHS software, you'll probably be asked to "prove the ROI".
What does that even mean? Well, when someone asks about 'ROI' or 'return on investment', what they're really asking is:
"How much will this cost, and how much will I get back?"
To help you answer that question, we've laid out the steps we take to determine how much time and money a company can expect to save using EHS software.
5 Steps to Estimate ROI for EHS Software
- Determine the number of staff who will use the software
- Figure out how much time your core staff spends on common activities
- Quantify the potential time savings
- Define other cost savings opportunities
- Figure out the true cost of the software
1. Determine the number of staff who will use the software
We divide these into two groups: "heavy" and "light" users. Heavy users include members of your core EHS team as well as any consultants you work with. Light users are typically non-EHS staff at your facilities who will use the software to report near misses or capture risk observations.
2. Figure out how much time your core staff spends on common activities
To get a good estimate, we look at how many hours per month each EHS staff member spends on tasks like:
- Creating and updating records
- Uploading data
- Correcting data errors and managing formulas
- Assigning tasks, notifications, and follow-ups
- Analyzing data and creating reports
- Preparing for external audits
- Performing risk assessments
3. Quantify the potential time savings
In order to do this, we look at how much time a typical employee can save on each of the above tasks by using EHS software.
For example, let's say one of your core EHS team members spends 8 hours per month creating environmental compliance reports. Using software, they can do the same task in 4 hours per month. If you're paying them $35 per hour to perform this task, that's a cost savings of $1680 per year for each employee.
When you consider all the time saved on tasks like reporting, sending notifications, and searching for documents, the numbers can really add up.
4. Define other cost savings opportunities
Of course, time savings aren't the only benefit of EHS software. EHS software can also help avoid incidents and their related costs including legal fees, medical and workers compensation expenses, fines, lost administrative time, and related travel expenses. You'll want to factor these in to your ROI estimate.
5. Figure out the true cost of the software
When you're buying a car, your cost of ownership will be more than the price on the sticker.
Similarly, there's more to the cost of software than the initial purchase price. Whether you're evaluating commercial software or a homegrown solution, we encourage companies to consider the 3-year cost of ownership. This includes implementation services, training time, and ongoing maintenance. Keep in mind that cloud-based software impacts fewer resources, and maintenance is included.
By showing the actual cost and time savings (as well as non-financial benefits), you can help your CEO and CFO feel confident that an investment in EHS software is money well spent. Most of our customers see a payback in under a year, and the ROI is typically greater than 5x the cost of the software. If you'd like some help determining your biggest cost and time savings opportunities, let us perform a free custom ROI assessment for you.