# How To Calculate the ROI of a New Software Purchase | Capterra > Avoid costly regrets by calculating return on investment (ROI) first. Use our free, easy-to-use software ROI calculator to see the benefits of SaaS and other software investments. Source: https://www.capterra.com/resources/software-roi-calculator --- # How To Calculate the ROI of a New Software Purchase Written by: Amita Jain Amita JainAuthor Senior Writer Experience I've been writing for Capterra since August 2021, with the goal of becoming a trusted voice in the finance technology market. I have... [See bio & all articles](https://www.capterra.com/resources/author/ajain/) and edited by: Parul Sharma Parul SharmaEditor Content Editor Experience I have been an editor at Capterra for over two years, contributing to curating and enhancing content for various niches, including ... [See bio & all articles](https://www.capterra.com/resources/author/parul-sharma/) Published August 21, 2025 6 min read Table of Contents - [What is ROI and how to calculate it?](#what-is-roi-and-how-to-calculate-it) - [How much does software cost?](#how-much-does-software-cost) - [What are the gains from software?](#what-are-the-gains-from-software) - [Example: Calculating ROI for project management software](#example-calculating-roi-for-project-management-software) ## Run return on investment (ROI) calculation before buying new software with our free calculator. Would you burn $5 in gas to drive across town and save $2 on office supplies? Of course not—that’s a clear loss. Yet 60%[\*](#methodology) of small business owners make a similar mistake when buying software, regretting purchases because the real costs turn out to be higher than expected. In business terms, that’s a negative return on investment (ROI). And it can quietly drain your budget and delay your growth plans by months. Before you commit, a quick ROI check can answer a critical question: **Will this software save enough money, or free up valuable time, to justify the costs?**  The math isn’t complicated, but getting reliable results depends on using the right inputs. Our free ROI calculator for SaaS purchases can help you organize those inputs so nothing gets missed. Software ROI Calculator [](#signup) Exactly how much your business can save depends on your specific situation and software choice. Let’s break it down.  ## What is ROI and how to calculate it? Think of ROI as your **‘did I win or lose?’ score** on any purchase. It tells you whether an investment makes sense or if you're about to make an expensive mistake. Theoretically, the formula is straightforward: **(Gain on investment - Cost of investment) ÷ (Cost of investment) = ROI** Plugging this into our office supplies example above will give: **\[$2 saved on office supplies - ($5 spent on gas + $8 spent on office supplies)\] ÷ ($13) = -0.8 or -80% ROI** The negative ROI means that you lost 80% of your investment. Ideally, you want positive ROI (the higher, the better), so you know you’re getting back more than you’re spending.  Calculating ROI for software can be trickier than for gas and office supplies. This is because quantifying the value of software isn’t always obvious, but we can do it. First, let’s determine the cost side of the ROI equation. ## How much does software cost? When you’re looking at software, the sticker price is just a slice of the total cost.  Say you buy project management software for $100 a month. Will that be your cost? Yes and no. Soon you’ll realize: - You need help integrating the new tool with your email or document management systems. - You need to migrate old data into your new software. - Your team needs training on the new tool.  - A few months in, you might need to upgrade to a higher plan. Suddenly, that $100 per month tool costs a lot more in time, effort, and actual dollars than you first thought.  To get a clearer picture of the total cost of owning software, think in two buckets: ### 1\. Upfront costs (Things you pay for once) - Customization and integrations with other systems - Data migration from your old software  - Initial training for the team - Any necessary hardware  Even if you’re not developing software from scratch, these costs still show up.  ### 2\. Ongoing costs (Costs that stick around) - Monthly or annual subscription/license fees - Customer support or maintenance charges - Upgrades, add-ons, or extra features For SaaS tools, ongoing costs often include subscription fees, user-based pricing, and periodic upgrades. And don’t forget costs, such as faster internet, better hardware, or the employee work hours spent on adjusting to the new workflow. What about free software options? You may be thinking, if there’s a free version available, why not use that and put $0 as cost to get a huge ROI. Unfortunately, it’s not that simple! Free versions often have **hidden costs** like missing features, user limits, and lack of customer support. If a free tool ends up doubling the time you spend on basic tasks or leaves you stuck when something goes wrong, it might not cost you money upfront, but it’ll cost you in lost productivity. ## What are the gains from software? Now that you know what software might cost, let’s talk about what it can give back.  Software usually pays off in two big ways: - **It saves you money** by making your work faster, more efficient, or less prone to errors. - **It helps you make more money** by uncovering new opportunities or improving customer satisfaction. But here’s the catch: These gains aren’t always obvious at first glance. You need to look a bit deeper to find them.  The benefits should come from specific actions you can measure, and ideally, tie directly to actual dollars. **For example:**  - Automate weekly reporting → save 4 hours → free up time to onboard an extra client - Automate invoice processing → cut error-fixing time by 50%  - Automate product-launch checklist → reduce time-to-market by 5 days - Integrate CRM and email → boost follow-ups by 25% - Automate scheduling → reduce overtime by 15% To hunt down actual measurable gains follow these steps: ### Step 1: Start with a quick time audit Pick one week and log how long routine tasks usually take. Chances are you’ll find 10-15 hours of work that software could handle automatically.  _At, say, $20 per hour, reclaiming just 10 hours per week translates to over $9,500 saved annually._  ### Step 2: Count your mistakes How often do you find yourself fixing billing errors, redoing proposals, or chasing missing project details? Each fix costs time and credibility.  _Software that prevents even two errors monthly could save thousands over a year._ ### Step 3: Look for missed revenue opportunities Could you take one more project if proposals took half the time? Could you land an extra client if follow-up was automated? Could smoother customer service keep a departing customer?  _Put dollar values on these scenarios._ SaaS platforms often deliver gains through scalability, remote access, and integrations.  Our ROI calculator makes it easy to plug in your estimates for **costs saved** and **revenue gained**, so you can see the full upside, not just the price tag. ## Example: Calculating ROI for project management software Take Alex’s 12-person digital marketing agency.  _Alex was at her breaking point. Every Monday started with a 2-hour meeting to figure out where projects stood. Clients were calling confused about deliverables. Her top designer nearly quit because he was spending more time in status meetings than designing. So, she decided to invest in a project management tool._ Alex did something smart: She measured the problem first. For one week, she used a time tracking app to track how much time her team spent just staying organized: updating spreadsheets, sending follow-up emails, and holding status meetings. It added up to **20 hours** **per week** of pure coordination overhead. At a $30/hour average, that's **$600 per week**, or **$31,200 per year,** spent on tracking projects instead of doing billable work. Next, Alex tested a SaaS-based project management tool during a 30-day free trial. The software cut coordination time in half. Automated updates and shared dashboards turned Monday marathons into 15-minute standups. That saved about **10 hours per week**, or **$15,600 per year** in labor (10 hours X $30/hour X 52 weeks). For the purpose of this exercise, let’s say the software costs $35/user/month for 12 users, which is $5,040 per year, plus $2,500 for one-time setup and training, and $700 in annual maintenance. That’s **$8,240 total annual cost**. Now the math: **ROI = ($15,600 saved - $8,240 spent) ÷ $8,240 = ~0.89 or 89%**  That’s approximately 89% return or 89 cents profit for every dollar spent. And that’s before factoring in the bonus of happier clients, a more focused team, and the ability to take on more work. ## Avoid regrets and calculate your ROI  Measuring ROI first helps you organize costs, quantify gains, and test different scenarios before you commit to a purchase.  Whether you’re comparing tools, justifying a purchase, or simply trying to avoid buyer’s remorse, our free ROI calculator makes it easy. Just plug in your numbers and the calculator will do the math and give you clear financial insights.  **Download our free software ROI calculator and take the guesswork out of your next software purchase.** * * * **Methodology** \*Capterra’s 2024 Tech Trends Survey was designed to understand the timeline, organizational challenges, adoption & budget, vendor research behaviors, ROI expectations, satisfaction levels for software buyers, and how they relate to buyer’s remorse. The survey was conducted online in July 2023 among 3,484 respondents from the U.S., U.K., Canada, Australia, France, India, Germany, Brazil, and Japan, with businesses across multiple industries and company sizes (5 or more employees). Respondents were screened to ensure their involvement in software purchasing decisions. * * * ### Was this article helpful? * * * ## About the Authors [### Amita Jain](https://www.capterra.com/resources/author/ajain/) Amita Jain is a senior writer for Capterra, covering finance technology with a focus on expense management and accounting solutions for small and midsize businesses. Her work has been featured in Careers360, among other publications. [### Parul Sharma](https://www.capterra.com/resources/author/parul-sharma/) Parul is an editor at Capterra with over half a decade of experience curating news, IT, software, finance, lifestyle, and health content. She excels at simplifying complex terms into engaging content for SMBs. Parul has worked as a feature writer for DNA India, India’s premier media portal. She was also the highest scorer in her English literature graduation and post-graduation class. ### RELATED READING - [Choosing Project Management Software? 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