## Why ROI Matters
SAP Business One is a significant investment. Understanding the expected return helps justify the project, set realistic expectations, and measure success post-implementation.
## The ROI Formula
**ROI = (Total Benefits - Total Costs) / Total Costs x 100**
Let's break down both sides of this equation for wholesale distributors.
## Quantifiable Benefits
### 1. Inventory Reduction (15-25% average)
Wholesale distributors typically carry excess inventory due to poor visibility and manual processes.
**Example**: A distributor with $2M in inventory reduces stock by 20%
- **Annual saving**: $400,000 in freed capital
- **Carrying cost reduction**: $80,000/year (at 20% carrying cost rate)
### 2. Order Processing Efficiency (50-70% improvement)
Manual order entry, paper-based processes, and disconnected systems waste time.
**Example**: 10 order processors handling 200 orders/day
- **Before**: 15 minutes per order average
- **After**: 5 minutes per order with SAP B1
- **Time saved**: 167 hours/month
- **Annual saving**: $60,000+ in labor costs
### 3. Reduced Errors and Rework (80% reduction)
Errors in orders, invoicing, and shipping cost money.
**Example**: 3% error rate on 50,000 annual orders
- **Before**: 1,500 errors/year, $50 average cost to fix
- **After**: 300 errors/year with SAP B1 validation
- **Annual saving**: $60,000
### 4. Improved Cash Flow (15-30% faster collections)
Better invoicing and AR management accelerates payment.
**Example**: $10M annual revenue, 45-day DSO
- **After SAP B1**: DSO drops to 35 days
- **Cash flow improvement**: $274,000 freed up
### 5. Better Purchasing Decisions (5-10% procurement savings)
Vendor comparison, demand forecasting, and volume optimization.
**Example**: $5M annual purchasing
- **5% improvement**: $250,000/year in better pricing and reduced waste
### 6. Revenue Growth (indirect but significant)
Better service levels, faster quoting, and customer self-service drive growth:
- Fewer stockouts mean fewer lost sales
- Faster quotes mean higher win rates
- B2B portal enables 24/7 ordering
- Typical revenue uplift: 5-15% within 2 years
## Total Cost of Ownership
For a mid-size wholesale distributor (15 users):
| Cost Category | Amount |
|--------------|--------|
| Software licensing (Year 1) | $24,000 |
| Implementation services | $65,000 |
| Infrastructure/hosting | $12,000 |
| Training | $8,000 |
| Annual support (ongoing) | $18,000/year |
| **Year 1 Total** | **$109,000** |
| **5-Year Total** | **$181,000** |
## ROI Calculation Example
**Mid-Size Wholesale Distributor (15 users, $10M revenue)**
### Annual Benefits:
| Benefit | Annual Value |
|---------|-------------|
| Inventory carrying cost reduction | $80,000 |
| Order processing efficiency | $60,000 |
| Error reduction | $60,000 |
| Improved cash flow (opportunity cost) | $15,000 |
| Procurement savings | $250,000 |
| **Total Annual Benefits** | **$465,000** |
### 3-Year ROI:
- **Total benefits (3 years)**: $1,395,000
- **Total costs (3 years)**: $145,000
- **Net benefit**: $1,250,000
- **ROI**: **862%**
- **Payback period**: Approximately **3-4 months**
## Industry Benchmarks
Based on our client implementations:
- **Average ROI**: 300-500% over 3 years
- **Payback period**: 4-8 months
- **Inventory reduction**: 15-25%
- **Order processing improvement**: 50-70%
- **Month-end close reduction**: 50-75% faster
- **Revenue growth**: 5-15% within 2 years
## Beyond the Numbers
Some benefits are harder to quantify but equally valuable:
- **Better decision-making** from real-time data
- **Employee satisfaction** from eliminating manual drudgery
- **Customer satisfaction** from improved service
- **Scalability** to support future growth
- **Compliance confidence** from audit trails
- **Competitive advantage** from operational excellence
## How to Build Your Business Case
1. **Document current costs** - Map your existing processes and their costs
2. **Identify improvement areas** - Where will SAP B1 have the biggest impact?
3. **Use conservative estimates** - Build credibility with realistic projections
4. **Include soft benefits** - Mention them even if you can't quantify them
5. **Plan for phased value** - Benefits increase as users gain proficiency
## Let Us Help
We've helped dozens of wholesale distributors build compelling ROI cases for SAP Business One. Our free consultation includes a preliminary ROI estimate based on your specific business metrics.
[Get Your Free ROI Assessment](/free-consultation)
