How to measure ROI of custom software for your business

Investing in custom software is a huge decision. 

You’re spending money, time, and effort to build a solution tailored to your business needs. But how do you know if it’s actually paying off?

That’s where measuring return on investment (ROI) comes in. 

You need to understand the financial and strategic benefits of your custom software to justify the cost and ensure you’re making an informed decision.

In this article, we’ll break down how to measure the ROI of custom software, key metrics you should track, and best practices to get the most out of your investment.

Let’s dive in!

Custom software: how much does it cost on average?

The cost of custom software isn’t easy to pin down.

There’s no universal price tag, but here’s a rough estimate based on complexity:

Custom software development cost

Of course, these are just ballpark figures. 

Your actual cost will depend on a number of different factors, like the scope, the tech stack you use, the development team you hire, project duration, and more.

So, a complex enterprise-grade system will cost more than a simple app with only a couple of features.

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Investing in custom software isn’t cheap, but if you get it right, it pays for itself. 

If you want to know if your investment was worth it, you need to measure your custom software’s ROI.

Next, we’ll show you how to calculate ROI and key metrics you need to track.

Metrics and methods to measure custom software ROI

On its own, calculating ROI isn’t complicated. 

It follows a simple formula:

We’ll give you an example.

Let’s say you’ve built a new e-commerce app that generated $500,000 in revenue and cost $200,000 to develop.

Then, the calculation looks like this:

This comes out to an ROI of 150%. Or, in other words, for every $1 you invested, you get $1.50 in return.

Now, the tricky part when measuring ROI isn’t the calculation.

It’s measuring the total benefits of your custom software, from revenue increases and cost savings to new revenue streams and overall business growth.

Next, we’ll go over the key quantitative and qualitative metrics you’ll need to track to measure them.

Quantitative metrics

Numbers don’t lie. And to measure the ROI of custom software, you need hard data.

Quantitative metrics show you exactly how your software impacts revenue, cuts costs, and improves efficiency – no guesswork.

Here are some metrics you should track:

• Revenue increase – Track how much extra revenue your custom software generates through sales, upsells, or new business opportunities.
• Cost savings – Measure how much you’ve saved by automating tasks, reducing labor costs, and eliminating redundant subscriptions.
• Productivity gains – Calculate the time saved by streamlining workflows, improving team collaboration, and speeding up processes.
• User adoption rates – Monitor how many employees or customers actively use the software and engage with key features.
• Operational efficiency – Measure improvements in task completion speed, process automation, and system reliability.
• Customer retention – Analyze churn rates, subscription renewals, and repeat purchases driven by an improved user experience.
• IT and maintenance cost reduction – Assess savings from lower infrastructure costs, and reduced reliance on IT support.

Make sure to set benchmarks and measure revenue, costs, or efficiency before and after launching your custom software solution.

Also, you don’t need to track every metric we listed above.

Focus only on metrics that directly impact your business.

In short, quantitative metrics prove whether your software actually delivers real value. 

And if the numbers don’t add up, it’s time to optimize.

Qualitative metrics

Not everything can be measured in numbers. 

Some of the biggest benefits you get from custom software come from things you can’t easily quantify.

And that’s where qualitative metrics come in.

They help you track the intangibles like user experience, improvements in decision-making, or how your brand is perceived.

These aren’t just “soft” benefits. They might not appear on a spreadsheet, but they make a huge difference.

Here are some key qualitative metrics you should track:

• User satisfaction  – Measure employee and customer satisfaction through surveys, NPS scores, and direct interviews. If people love using it, it’s working.
• Adoption speed – Track how quickly your employees or customers fully transitioned to using the software on a daily basis. Slow adoption? There’s a problem.
• Decision-making efficiency – If the software provides faster, clearer insights, your team should be able to make better business decisions with less guesswork.
• Process simplicity – Look at how many steps a task used to take versus how many it takes now. Good custom software will remove friction.
• Competitive advantage – Does your software offer a smoother experience, unique features, or better service than competitors? If yes, that’s a win.
• Brand perception – Software that looks modern, runs smoothly, and feels intuitive will make your business appear more professional and innovative.

Quantitative data tells you what’s happening, but qualitative metrics explain how and why it matters.

And without them, you’re only seeing half the picture.

Best practices for tracking custom software ROI

Next, we’ll discuss some best practices you need to follow when tracking custom software ROI.

Set clear goals before development

If you don’t set clear goals before development, you’re already in trouble.

Without them, you risk scope creep, wasted budgets, and software that doesn’t deliver

And if that happens, you won’t see ROI.

So, how do you set the right goals?

You need to define the problem first. Ask yourself, what’s the biggest pain point your custom software should solve?

Also, make sure your goals are measurable and tied to business outcomes – the SMART goals framework is a great choice.

Let’s go back to our e-commerce app example from earlier for a bit.

A SMART goal could be: “Build a custom chatbot that will reduce average support response times from 10 minutes to under 3 minutes within 6 months.”

Well-defined goals like this are key to successful development and keep it focused and efficient.

Without them, you’re just writing code and hoping for the best.

And that’s a recipe for disaster.

Use analytics tools to measure impact

If you’re not tracking data, you’re just guessing.

And guesswork won’t tell you if your custom software is actually delivering value.

Analytics tools give you real-time insights into how users interact with your software, its performance, and overall business impact.

They show you what’s working, what’s not, and where you need to improve.

Some of the most popular analytics tools you should consider using are:

• Google Analytics
• Mixpanel
• Amplitude 
• Tableau
• Hotjar
• Pendo
• Contentsquare

Of course, not every tool will be a good fit, so you need to choose ones that track the most relevant data for your specific use case.

Also, don’t check the data once and forget it. Review trends weekly or monthly so you’re always on top of any changes.

In a nutshell, with the right analytics tools, you’ll know what’s driving results and what’s holding you back.

And that’s key to maximizing ROI.

Get user feedback to measure qualitative metrics

Analytics tell you what’s happening. User feedback tells you why.

And if you don’t talk to users, you’re flying blind.

They know where your software shines and where it frustrates them. Their insights will help you improve usability and long-term ROI.

So, where can you collect user feedback? Here’s a few options:

• Surveys – Quick, structured insights on user satisfaction.
• Interviews – Deep, qualitative feedback on users’ pain points.
• In-app feedback – Real-time user input while they use your product.
• Support tickets – Patterns in customer complaints will reveal friction points.
• Session recordings – See exactly how users interact with key features.

But, what you really need to do is create a feedback loop.

A feedback loop will allow you to continuously collect, analyze, and act on the feedback you receive from users.

This is important because user feedback isn’t just useful or nice to have – it’s essential. 

And you need to stay on top of it to build a product that will deliver a healthy ROI.

Key benefits of custom software development for businesses

Finally, we’ll go over the key benefits you can get from custom software development.

Efficiency gains

Every business has bottlenecks – manual tasks, slow processes, and outdated tools that waste everyone’s time. 

And with custom software you can eliminate them.

Just automating slow and repetitive tasks, for example, can be a game-changer for your business.

Here are some stats that prove it:

source: ServiceNow

But, there’s a catch. You need to get it right, which isn’t always easy.

You should start by identifying the biggest bottlenecks a custom software solution could solve.

Your employees will know where inefficiencies are – get their input, it will be invaluable.

Also, here’s a very important tip – keep it simple. 

Overcomplicated software will create new inefficiencies instead of solving them.

Remember, efficiency isn’t about doing more – it’s about doing better. 

And the right custom software will help you make that happen.

Cost savings

Custom software isn’t just an expense, it’s a long-term cost-cutting tool.

Off-the-shelf software has both upfront and hidden costs. 

You pay upfront for licenses or subscriptions, but you also have to deal with hidden costs like feature limitations, per-user fees, and inefficiencies that slow down your team.

And all of these costs add up quickly.

On average, companies use 112 SaaS apps and spend between $1,000 and $3,500 each year per employee on SaaS tools.

source: Backlinko

So, if you’ve got 100 employees, you’re likely spending between $100,000 and $350,000 every year on SaaS tools alone.

And with a tailor-made custom solution, you can replace multiple third-party tools and significantly cut these costs.

But. that’s not all.

Here are some more ways you can save money when you build custom software:

• Improved efficiency – You can automate the boring, repetitive stuff so your team gets more done without hiring extra people or racking up overtime.
• Fewer human errors – You can minimize human mistakes in data entry, billing, and compliance to avoid financial losses.
• Lower IT and maintenance costs – You can build a system that requires fewer updates and has lower downtime. Plus, you won’t have to pay for expensive external support.
• Optimized resource usage – You can track and manage inventory, staff hours, and workflows more efficiently to cut unnecessary spending.

Once you add everything up, that’s a lot of money going back into your business instead of being wasted on inefficient software.

And the best part?

Your savings grow year after year, so your investment keeps paying off.

And you can’t beat that.

Revenue growth

Building custom software isn’t just about cutting costs. It’s also about making more money.

A high-quality product will help you reach more customers and sell faster. 

You’ll remove friction from sales, improve customer experience, and open up new revenue streams.

Here’s how custom software can drive revenue:

• Increased conversions – A smoother, more intuitive experience means you’ll lose fewer customers and improve your conversion rate.
• Improved customer retention – If your users are happy, they’ll stick around longer and spend more.
• New business models – You can offer new services, create subscriptions, or launch products/features that open new revenue streams.
• Attracting new customers – Unique features and a better user experience will make you stand out from the crowd and bring in new users.
• Speeding up sales – Your sales team can spend less time on manual tasks and more time closing deals.

But getting these benefits isn’t down to luck.

It’s down to building custom software that fits your business and actually delivers value.

If you get it right, it won’t just support your growth – it will accelerate it.

Custom software ROI: FAQs

Need help building your custom software solution?

Do you want to build a custom software solution to transform your business but don’t have the in-house resources to pull it off?

Well, you’re definitely in the right place.

We’re an EU-based, high-caliber software development company and we have 12+ years of experience building custom solutions for some of the biggest players in the game.

If you want to learn more,  feel free to reach out and our team will get back to you as soon as possible.