AI can help small and medium-sized businesses (SMBs) save money, boost revenue, and improve efficiency - but how do you measure its ROI?
Here’s what you need to know:
- Cost Savings: AI reduces labor costs, cuts errors, and optimizes resources. SMBs report a median annual savings of $7,500, with 25% saving over $20,000.
- Revenue Growth: AI improves customer retention, increases sales, and enhances customer experiences. For example, AI-driven recommendations can boost order values by 20%.
- Efficiency Gains: AI automates tasks, speeds up processes, and enables businesses to scale without proportional cost increases. Productivity can increase by 27% to 133%.
Quick tip: Start small with AI tools like chatbots or scheduling assistants, track metrics like cost savings and customer satisfaction, and calculate ROI using the formula:
ROI = (Net Gain from Investment / Investment Cost) × 100
This article breaks down how SMBs can measure these benefits, track the right metrics, and calculate ROI to make smarter AI investments.
Key Metrics to Measure AI ROI
Tracking the right AI metrics can boost success by 1.7×. The key is to focus on measures that directly impact your bottom line.
To get a full picture of your AI investment, it’s important to evaluate both tangible benefits (like cost savings and increased revenue) and intangible benefits (such as enhanced customer experiences and happier employees). Let’s dive into the specific metrics that can help quantify these benefits.
Cost Savings from Automation
One of the most immediate benefits of AI adoption is cutting costs. On average, businesses using AI report a 20% reduction in costs. Here’s how companies are measuring these savings:
- Labor Cost Reductions: Calculate the hours saved and multiply by hourly wages. For instance, small business owners save 13 hours per week on their own tasks, plus another 13 hours per week for their employees. A regional consultancy automated data entry, saving 10 hours weekly per staff member.
- Error-Related Savings: AI can reduce costly mistakes. A manufacturing business cut defect rates by 15% through AI inspections, significantly lowering rework expenses.
- Resource Optimization: AI-powered inventory management can reduce holding costs by up to 30%. For example, a local café used AI to manage inventory, cutting waste by 12% and saving thousands annually.
The median annual savings for businesses adopting AI is $7,500, with 25% reporting savings of over $20,000. Considering that small businesses typically spend just $1,800 annually on AI, the return on investment is clear. And it’s not just about cost savings - AI also drives revenue growth and customer loyalty.
Revenue Growth and Customer Retention
Beyond cutting costs, AI can significantly boost revenue and strengthen customer relationships. In fact, 80% of businesses using AI for marketing and sales report increased revenue, with 40% seeing gains of 6% or more.
- Customer Acquisition and Conversion: An e-commerce business used AI-driven recommendations to increase the average order value by 20%, driving higher sales. Metrics like conversion rates, average order values, and customer acquisition costs are key here.
- Retention and Revenue Impact: A software startup improved its Net Promoter Score (NPS) from 30 to 65, boosting customer retention by 40% and increasing monthly recurring revenue by 50%.
- Customer Satisfaction Scores: Companies using AI for customer service have seen 15% improvements in satisfaction scores. AI has also reduced average resolution times by 68%. For example, a retail business implemented an AI virtual assistant, which improved satisfaction ratings and increased repeat purchases.
"What gets measured gets managed." – Peter Drucker
Productivity and Efficiency Gains
Productivity gains often deliver the highest long-term returns, making AI a powerful tool for small and medium-sized businesses. AI adoption has been shown to increase productivity by 27% to 133%.
- Time Savings and Task Completion: An AI chatbot reduced response times by 30%, allowing customer service agents to focus on more complex issues. Tracking tasks completed and time saved on repetitive processes can reveal these benefits.
- Development and Launch Speed: A software company used AI for code testing, reducing development cycles by 25%. Faster development means quicker product launches and growth.
- Scalability Without Proportional Costs: Dialzara’s AI answering service handles rising inquiry volumes at 90% lower costs compared to hiring additional staff. Executives report a $5.50 saving per contained conversation.
- Process Efficiency Improvements: Automating data extraction led to 30% to 40% efficiency gains. A digital marketing agency achieved a 500% ROI by automating email campaigns, saving $10,000 while generating $50,000 in new revenue.
"Our findings are quite emphatic and show a clear-cut productivity premium for SMEs who adopt AI. Given the UK Government's mantra about raising productivity levels, increasing AI adoption could potentially play a pivotal role in addressing the endemic problem of weak productivity in poorly performing SMEs. AI potentially offers SMEs short cuts that are easy to yield quick productivity wins such as planning staff rotas and reducing food wastage in a small restaurant, but are relatively inexpensive and easy to enact." – Professor Ross Brown, University of St Andrews Business School
How to Calculate AI ROI
Figuring out the return on investment (ROI) for AI projects gets much easier when you know what to measure and account for all costs involved.
Basic ROI Formula
The formula for calculating ROI is simple: ROI = (Net gain from Investment / Investment Cost) × 100. This percentage shows how much you're earning back for every dollar you’ve spent.
"Traditional ROI focuses on hard numbers, but AI benefits often extend beyond immediate financial gains" – Ankur A. Patel and Ishita Jaiswal.
To calculate ROI accurately, start by gathering baseline data. This includes metrics like how long tasks take, error rates, customer satisfaction levels, and operational costs. These benchmarks will help you measure improvements.
Here’s the process in a nutshell: set clear goals, define key performance indicators (KPIs), establish baselines, account for all costs, assign monetary value to benefits, calculate ROI, and revisit your calculations regularly.
Now, let’s look at some real-world examples to see how this formula works in practice.
Example Calculations by Use Case
Take Green Thumb Landscaping, a small business with 15 employees, as an example. They implemented two AI tools and saw measurable results.
AI-Powered Scheduling Assistant:
- Baseline: Scheduling took 4 hours of the owner’s time each week.
- AI Solution: A cloud-based scheduling app with AI features.
- Cost: $100 per month subscription, plus a one-time setup of 2 hours.
- Results: Scheduling time dropped to 1 hour weekly.
- Savings: About $900 in labor costs over 6 months.
Automated Invoicing System:
- Baseline: Invoicing took 6 hours monthly, with 30% of customers requiring multiple payment reminders.
- AI Solution: An AI-driven invoicing system.
- Cost: $50 per month subscription, plus 2 hours for onboarding.
- Results: Invoicing time reduced to 2 hours monthly, and late payments dropped from 30% to 10%.
- Savings: Around $720 in labor costs over 12 months, plus $2,400 annually from improved cash flow.
Total 12-Month ROI Calculation:
- Total Costs: $1,800 (subscriptions and staff time).
- Total Benefits: $4,020 (labor savings and cash flow improvements).
- ROI: (($4,020 – $1,800) / $1,800) × 100 = 123%.
For a different perspective, consider AI phone answering services like Dialzara. If your business pays a receptionist $15 per hour for 40 hours weekly (about $31,200 annually), and Dialzara costs far less while offering 24/7 service, you’d calculate ROI by comparing salary savings with the AI service’s cost, factoring in benefits like improved customer availability and efficiency.
These examples show how precise ROI calculations can help small and medium-sized businesses make smarter AI investments.
Including All Costs and Benefits
A thorough ROI evaluation should include all related costs and benefits - both direct and indirect. Missing these details could lead to incomplete assessments.
One-Time Costs to Account For:
- Software setup and configuration.
- Staff training (calculated per hour).
- Data migration or system integration expenses.
- Hardware upgrades, if needed.
Ongoing Costs to Track:
- Subscription fees (typically $30–$200 per month for off-the-shelf AI tools).
- Maintenance and updates.
- Staff time spent monitoring and optimizing the system.
Direct Benefits to Measure:
- Labor savings (calculated using hourly wages).
- Faster task completion, increasing productivity.
- Improved cash flow due to better payment collection.
Indirect Benefits to Consider:
- Higher customer satisfaction.
- Better employee morale by reducing repetitive tasks.
- Scalability without proportional cost increases.
- Competitive advantages that could boost future revenue.
For example, a Technology Training Incubator used AI to enhance its contact center. They cut response times from 24 hours to 6 hours, automated over 80% of inquiries, and saw a 13% boost in customer satisfaction scores. These changes led to potential annual savings of $120,000.
It’s worth noting that businesses that measure ROI for their AI projects are 1.7 times more likely to hit their AI goals. Top-performing companies often achieve a 13% ROI on AI projects - more than double the average ROI of 5.9% - because they take a detailed, methodical approach to tracking and managing their AI investments.
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AI ROI Examples for SMBs
Examples from real businesses show that when small and medium-sized businesses (SMBs) evaluate AI's return on investment (ROI) by looking at cost savings, customer experience, and scalability, they make smarter decisions that drive growth.
Cutting Costs with AI Virtual Assistants
AI virtual assistants, like Dialzara, are game-changers for SMBs looking to cut costs. They can replace the need for a full-time receptionist, delivering immediate savings.
Let’s break it down: A receptionist earning $15 per hour for a standard 40-hour work week costs an SMB $31,200 annually. Add in benefits, payroll taxes, sick days, and vacation time, and the total jumps to over $40,000 a year. In contrast, Dialzara offers up to 90% savings on these costs while providing 24/7 availability - something no human employee can match.
Dialzara doesn’t just answer calls; it transfers calls, screens callers, books appointments, and handles client intake. All this without the need for HR headaches or ongoing management.
"AI tools are designed to help existing processes. As a result, they're not set-and-forget." – Caylin White, Editorial Lead and Growth Manager, Salesforce
Unlike human employees, AI assistants don’t need training, don’t call in sick, and don’t have off days. It’s no wonder that 93% of small businesses using AI tools report cost-effective solutions that boost profits. For SMBs, this means professional phone handling at a fraction of the cost, leveling the playing field with larger companies that have dedicated customer service teams.
Enhancing Customer Experience and Boosting Revenue
AI-driven customer service doesn’t just save money - it also improves customer satisfaction and drives revenue. Businesses using AI in customer service have seen a 15% increase in customer satisfaction scores. This leads to better retention and more referrals, as happy customers are more likely to stick around and recommend your business.
AI tools like Dialzara ensure round-the-clock availability. While competitors relying solely on human staff might miss leads outside of business hours, AI captures those opportunities. A Sybill study revealed that 92.1% of businesses saw measurable results from AI investments in 2022. AI shines during peak times, handling large volumes of inquiries without compromising service quality - something human teams often struggle with.
Today’s customers expect fast, personalized service. 65% of customers want companies to adapt to their changing needs and preferences. AI meets this demand by offering instant, tailored responses based on customer history, building stronger relationships and increasing lifetime value.
For appointment-based businesses, AI automates booking and scheduling, eliminating the back-and-forth that often delays sales. This not only improves engagement but also shortens the time between initial contact and a completed sale.
Growing Without Inflated Costs
AI doesn’t just help SMBs save money - it enables them to grow without drastically increasing expenses. With AI, businesses can handle more customers and scale operations without hiring additional staff.
Here’s why this matters: A traditional business model might require doubling staff to handle double the workload. But with AI, the same system that manages 50 calls a day can easily handle 100 or even 200 calls without extra costs.
"Organizations can simply move much faster than ever before. Everyone can develop their own MVPs while solving problems at unprecedented speed. Junior workers gain more experience in a short period thanks to a healthy collaboration with their AI-driven sidekicks." – Adrienne Uthe, Managing Principal, Kronus Intelligence Group
A 2023 report on Copilot for Microsoft 365 found that 70% of users said they were more productive, while 68% said it improved the quality of their work. The report also highlighted a 29% faster completion rate for tasks like searching, writing, and summarizing.
For phone-based businesses, scalability is especially valuable. Dialzara integrates with over 5,000 business applications, allowing it to grow alongside the business. Whether you’re entering new markets or adding services, the AI agent can quickly adapt to new processes and information.
AI pricing models often scale favorably. Unlike human employees who require proportional salary increases, AI services typically offer flat rates or discounts as usage grows. This ensures that as your business generates more revenue, operational costs don’t rise at the same pace.
Finally, 63% of U.S. customers now expect companies to adopt AI chatbots and automated customer support. This growing acceptance means scaling with AI doesn’t alienate customers - it meets their expectations, giving SMBs a competitive edge.
Conclusion: Getting the Most ROI from AI
Measuring the return on investment (ROI) from AI isn't just about crunching numbers. It’s about understanding how this technology reshapes operations and drives growth. For instance, AI has been shown to cut costs by 15.2%, boost revenue by 15.8%, and improve productivity by 40%.
Key Takeaways
The most successful small and medium-sized businesses (SMBs) focus on three main areas when evaluating AI ROI: cost savings, revenue growth, and operational efficiency. These metrics don’t exist in isolation - they work together to reveal how AI impacts your business as a whole.
Start small and stay focused. Doug Bonderud offers this advice:
"To make the most of AI, get specific and start small. Focus on solutions that streamline employee tasks and enhance ROI, and pace yourself. Just like AI, your business evolves over time - slow and steady wins this race."
Measure immediate and long-term gains. Reid Rasner from Omnivest Financial highlights the importance of looking beyond surface-level savings:
"AI investments must be measured beyond cost savings and actually ensure they drive a competitive advantage. One key metric is decision velocity. Faster, data-driven choices create outsized returns. Track revenue impact, efficiency gains, error reduction and adaptability to market shifts. AI's true ROI isn't just in numbers; it's in how decisively and intelligently a business moves."
Focus on measurable improvements. The best ROI metrics come from tangible results: time saved, costs reduced, revenue increased, and happier customers. In fact, businesses using AI have reported efficiency gains of 20–30%.
By applying these principles to AI pilot projects, businesses can achieve visible and meaningful results.
Next Steps for SMBs
Here’s how to take the first steps toward integrating AI into your business:
Start with a pilot project. Identify a specific area where AI can deliver quick results. For example, deploying AI for phone answering is a practical starting point. Tools like Dialzara allow you to set up an AI phone agent in minutes, making it easy to measure its impact right away.
Set clear KPIs and benchmarks. Before rolling out any AI solution, establish clear goals and performance metrics. Track these metrics over time to gauge success. Keep in mind that initial AI setup costs can be underestimated by 40–60%, so budget carefully to avoid surprises.
Monitor and refine your approach. Treat AI implementation as an ongoing process. Regularly assess system performance, gather team feedback, and adjust your strategy based on what works. Businesses that continuously refine their AI efforts tend to see the highest returns.
Balance short-term wins with long-term strategy. While cutting costs is an obvious benefit, don’t overlook the strategic advantages AI can bring. For example, 63% of U.S. customers now expect companies to use AI tools like chatbots for customer support. Meeting these expectations can set your business apart and position you for sustained success.
FAQs
How can small businesses measure the ROI of their AI investments?
To figure out the ROI of AI investments, small businesses should zero in on a few key metrics: cost savings, revenue growth, efficiency improvements, and customer satisfaction. Start by assessing the total costs of implementing AI - this includes setup, training, and ongoing maintenance. Then, weigh those expenses against the financial benefits, such as lower operational costs and higher sales.
Here's a straightforward formula to calculate ROI: ROI = (Net Benefits / Total Costs) × 100. For instance, if you're using an AI tool like Dialzara to automate customer service, measure its impact by tracking reductions in labor costs, the volume of calls it handles, and changes in customer feedback. This practical, data-driven approach helps ensure your AI investment is aligned with your business goals and produces measurable results.
What are some AI tools small businesses can use to quickly see results?
Small businesses have a lot to gain from AI tools that can simplify operations and elevate customer experiences almost instantly. Take AI-powered virtual assistants like Dialzara, for instance. These tools can handle a variety of tasks - answering and transferring calls, booking appointments, and managing customer inquiries. The result? Businesses save time, cut costs, and ensure round-the-clock availability for their customers.
On top of that, AI-driven marketing platforms can take customer outreach to the next level. They help personalize communication, fine-tune campaigns, and increase engagement, ultimately driving better conversion rates. These tools don’t just boost efficiency - they empower small businesses to respond to customer needs and scale operations more effectively. By leveraging AI, small businesses can focus on growth without compromising on service quality.
How do benefits like better customer satisfaction and happier employees impact the ROI of AI for small businesses?
Intangible perks, like better customer satisfaction and a boost in employee morale, can have a significant impact on the ROI of AI for small businesses. When customers are happier, they’re more likely to stick around, which naturally leads to higher retention rates and, over time, increased revenue. For instance, AI-powered tools can transform customer service by cutting down wait times and delivering consistent, high-quality support.
On the employee side, AI takes over repetitive tasks, allowing staff to focus on work that’s more meaningful and engaging. This shift not only ramps up productivity but also helps lower burnout and turnover rates, which means businesses save on hiring and training costs. While these advantages might not always be reflected directly in financial statements, they’re essential for fueling long-term growth and success for small businesses.
