You have probably done these calculations more than a handful of times to measure your investment's profitability, but how accurate is it for construction professionals as yourself?
Return on investment(ROI) is a financial measure used in almost every industry to calculate the profitability of gaining a return from an investment. It is a proportion that compares the gain or loss from a tangible investment relative to its cost. This calculation is useful in the process of evaluating the potential return from astand-alone investment-technological in this case- as it is compared to a traditional process. ROI is calculated by percentages, although it is a ratio measurement. By calculating ROI in percentage terms we can easily compare it to their investments and profitability rates.
The way I like to look at ROI in construction technology is how much risk and inaccuracy can it prevent? Now this is not an exact formula, it is a perceptible enhancement to the way we perform our back-office work, it is a blend of productivity boost due to intuitive tools that make our job easier and a democratisation of information that grant construction teams within a jobsite to work off of the same information, updated by the minute thanks to the cloud.
When we compare the tools and machinery that were used by the construction industry 30 or 40 years ago, we can agree on one thing: They advanced and made our job easier.Something similar happens with technology adoption in construction back-office,tools that are being engineered to ease our manual processes and increase our productivity in core functions while preventing risks that might transfigure into delayed essential tasks.
Imagine what a construction jobsite and back-office would be nowadays with no technological improvements, no collection of innovative tools, machinery, modifications and softwares. It is a fact that technology propels the construction industry to move forward with minimum error margin.
-Justify further technological investments: Integrations.This is the word we have heard over and over again during a customer's market research. Software integrations are defined as:
‘’The process of bringing together the component subsystems into one system and ensuring that the subsystems function together as a system, and in information technology as the process of linking together different computing systems and software applications physically or functionally, to act as a coordinated whole’’
Small and medium sized tech companies only integrate a handful of systems before becoming too expensive for their main audience but at the same time they are too small for bigger clients. This is the root cause of why small and medium sized construction companies are often left behind with a hybrid of a single software solution and manual processes. By performing and ROI, construction companies can justify the spend of another investment in technology, trying to put an end to the time consuming & high risk manual data input.
-Put a number on the total return to your costs: ROC (Return on Costs) is the term used to indicate the ratio of the total costs to the sales of a company. The lower this indicator value is, the better the financial result. Meaning that for every 1 dollar of sales, the company was able to create it at a lower cost. Being able to indicate that a technology investment made the company reduce costs on labor- therefore made the company more money is a considerable statement.
-Enables your team to be onboard with technology: This one feels a bit more personal for me, trying to get my team to use this. It seems like every office has a technology averse activist, you know the one that states on a daily basis that ‘’this just doesn’t work’’. Well, not with that attitude! Onboarding technology requires time and training, not all tools are self-taught and they don’t have to be. The truth is these tools are anetting of workflows and functionalities that require the minimum knowledge on how these steps work and carry on the next step. Once a team is onboarded successfully and enthusiastically you can go about the ROI calculus.
Demonstrate to your stakeholders the ROI being generated from these technological investments through tangible numbers or through efficiency boosts: Why is efficiency boost in a construction back-office even related to ROI calculations? Well, it’s easy:saving time with manual processes means you can focus your attention on essential tasks, making your work more efficient while saving the company money. There’s always a cost to keeping processes the way they are, do you know how much it’s costing you?
You might think that technology adoption in construction is only pointed at large companies, in fact-and many technology professionals agree- small and medium sized companies might have an advantage over larger companies.
-Free Technology: Accessibility to free technology and solutions has never been easier, mobile apps and cloud based softwares that are available for free. No need to perform a high risk one-time purchase or subscribe for a whole year on a platform that might end up not being adopted by your team. Softwares like Theo Build offer small and medium size companies the ease of free technology adoption and the benefit of 1 on 1 training.
-Low Risk: Smaller companies carry a low risk factor when it comes to adopting technology in construction job sites and backoffices, this due to the absence of technology to begin with and the fact that the implementations they decide to take over will most likely have a low financial impact. It has been shown that smaller companies carry the most enthusiastic teams for technology training and onboarding, everyone is moved by the idea of intuitive tools that will facilitate their job.
Enthusiastic teams =Exceptional Onboarding Experience = Easily Demonstrated ROI.
Other considerations of construction tech ROI
If you are determined to put a number on your construction tech investment, here’s a handful of considerations that might come in hand when trying to do the math.
-Cloud storage fees:Nowadays there’s more percentage of cloud based softwares, making physical documentation storage a thing of the past. But don’t get ahead of yourself here, cloud based storage comes with a cost as well, if you’re not paying a monthly or yearly subscription it is most likely your documentation is only stored for a shorter period of time, if this is the case then you need to download your documentation and store it in a external hard drive.
-Training: onboarding a new solution will require training, smaller tech companies offer free training and onboarding while larger companies require a one-time payment for a one-time training course. If you think onboarding a smaller company will save you the one-timetraining payment, well think about the labor hours your team is spending on these training courses and convert them to numbers.
-Installation Costs:This might be a costonly considered by larger companies since it requires an IT team and deployment hours that translate to labor hours. Small and mid-sized companies rarely countwith an IT team and are less likely to choose a tool that comes with an installation cost.
-Subscription costs and fees: Accounting for these costs is essential, not only are they the key factor to your ROI calculation,but they might also translate into a loss. If you pay for an annual subscription upfront in order to save 500$ but end up not onboarding the tool because it wasn’t the right investment, then this translates into a total loss.To avoid this from happening we suggest you try a tool that offers at least 3 months for free.
-Tech support and customer service: Even if these two are not translated into a cost, the lack of tech support and customer service translate into a delayed onboarding process which is then quantified as more time to implement = reduced ROI. Always check the customer support on any platform/tool/software you are trying to onboard with, look over their response time rate, communication skills and willingness to fix any issues with your account.
Return on Investment in construction technology is not only a quantifiable measure, it is an environmental improvement of increased productivity and greater accuracy.
Technology implementation in construction is a trend for 2021, Theo Build is a non subscription payment tool for construction professionals such as yourself, offering 1 on 1 free training courses and white glove onboarding for your team and subcontractors. Let us show you how to minimize risk in your monthly draw process in order to never set back the payment cycle for you and your subcontractors.