Defining Return On Investment (ROI) of Commercial Real Estate Software

Fortunately for you, most technology firms work hard to proactively address this issue.  In fact, you can probably find stats on their website or after a quick initial call.  Here are some common questions to ask yourself about the measurement of return claims that are being made.

• Are these claims real?   
• How are they computed?   
• What are the underlying assumptions?  
• How much data informs these claims?   
• Does the ROI output represent a small sample size?   
• Has the provider extrapolated one use-case and applied it to others? 
• Was the ROI a one-time result or can the provider point to an ongoing track record?

Generally speaking, ROI is a function of increasing revenue or decreasing costs.  But if it were really that simple, there wouldn’t be thousands of pages on Google dedicated to the topic.

Since each Commercial Real Estate business is unique, ROI is a very unique calculation.  We can generally identify some themes, however:

• Will this help me win more deals?
• Will this optimize my team or portfolio somehow?
• Will this provide expertise in an area we are currently deficient?
• Am I missing out if I don’t use this technology? 
• Can I avoid a costly mistake by using this?
• Will this control headcount?

One of the most commonly used, but least persuasive, ROI metrics is time saved.  Of course most software saves time, but frequently the time saved is for someone other than the person paying for the technology.  

As you think about ROI, think about the persona you are drafting the proposal for.  The boss usually isn’t that persuaded by a new hire analyst, saving some time.  Spend time thinking about how each stakeholder will benefit from this new technology and define ROI in a way that speaks to them.

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