According to a McKinsey study from February 2020, nearly 66% of CEOs don’t understand what their senior designers are doing.

While many entrepreneurs read that design-driven company outperform their competitors and therefore invest in design programs, the concrete benefits of design remain a puzzle to most of them.

As designers, we have just two options:

  • We can wait for entrepreneurs to learn the value of design, or
  • We accelerate the process by better communicating the value of our work.

Designers are predisposed to action, and it makes sense that we do the latter. However, there is an obstacle that designers are facing:

  • We try to explain the impact of design through qualitative thinking: empathy, aesthetics, and user experience, for example.
  • While these are imperative factors, they are not what business people understand or what triggers them to act.
  • Instead, we must be able to speak the language of business or quantitative thinking and help business associates translate the impact of design through numbers, metrics, and strategic arguments.
  • In a few words, we should start to calculate the RoI of a Design Project

A quick overview of how to calculate the RoI of a Design Project

RoI, or return on investment, is a way to measure the profitability of an investment.

To calculate the RoI of a design project, you’ll need to determine the total cost of the project, as well as the total benefits it is expected to provide.

Here’s the basic formula for RoI:

RoI = ((Benefits – Cost) / Cost) * 100%

To use this formula, you’ll need to determine the benefits of the design project in terms of financial value. This might include increased sales or revenue, reduced costs, or other financial benefits that can be quantified.

You’ll also need to determine project costs, which should include any direct expenses such as design fees, materials, and other costs associated with the project.

Once you have these values, you can plug them into the formula to calculate the ROI.

For example, if the benefits of a design project are expected to be $100,000 and the cost is $50,000, the ROI would be:

ROI = ($100,000 – $50,000) / $50,000 = 100%

This means that the design project is expected to provide a 100% return on the investment.

It’s important to note that ROI is only an estimate, and the actual benefits of a design project may differ from what was projected at the beginning.

Additionally, there may be other intangible benefits to a design project that are difficult to quantify in terms of financial value.

In these cases, it may be helpful to consider these benefits in addition to the financial RoI when evaluating the overall success of the project.

The process of how calculating the RoI of a Design Project

To calculate the RoI for a design project, you can follow these steps:

  1. Identify the goals of the design project and how they align with the overall business objectives. This will help you determine what benefits to include in the RoI calculation.
  2. Determine the expected benefits of the design project in terms of financial value. This might include increased sales or revenue, reduced costs, or other measurable financial benefits.
  3. Calculate the cost of the design project. This should include direct expenses such as design fees, materials, and other costs associated with the project.
  4. Use the RoI formula to calculate the return on investment: ROI = (Benefits – Cost) / Cost
  5. Evaluate the results of the RoI calculation. A positive ROI indicates that the design project is expected to be profitable, while a negative RoI indicates that it is expected to be unprofitable.
  6. Consider any intangible benefits of the design project that may be difficult to quantify in terms of financial value. These might include increased customer satisfaction, improved brand perception, or other benefits that are not easily measured in terms of money.
  7. Use the results of the RoI calculation and any intangible benefits to evaluate the overall success of the design project and determine whether it was a worthwhile investment for the business.

It may be helpful to periodically review the performance of the design project to see if it is meeting the expected RoI and to make any necessary adjustments.

Examples of how to calculate the RoI of a Design project

Here are two examples of how to calculate the RoI of a design project using the steps I described:

Example 1:

A company is considering a design project to redesign its website. 

The project goals are:

  • Improve the user experience,
  • Increase sales, and
  • Reduce customer acquisition cost

The company expects:

  • The redesign to result in a 10% increase in sales, and
  • 5% reduction in customer acquisition cost.
  • The design project cost is $50,000.
  1. Identify the goals of the design project: improve user experience, increase sales, and reduce customer acquisition costs.
  2. Determine the expected benefits:
    1. $50,000 x 10% increase in sales = $5,000;
    2. $50,000 x 5% reduction in customer acquisition cost = $2,500;
    3. Total expected benefits = $7,500.
  3. Calculate design project cost: $50,000
  4. Use the ROI formula to calculate the return on investment:
    1. ROI = ($7,500 – $50,000) / $50,000 = -85%
  5. Evaluate the results: The RoI is negative, indicating that the design project is not expected to be profitable.
  6. Consider any intangible benefits: The improved user experience may lead to increased customer satisfaction and loyalty, which could have long-term benefits for the company.
  7. Evaluate the overall success of the design project: While the ROI is negative, the intangible benefits of the project may make it worthwhile for the company.

Example 2:

A clothing retailer is considering a design project to create a new line of clothing.

The project goals are to attract a new customer base and increase sales. 

The retailer expects the new line to result in a 25% increase in sales. The design project cost is $20,000.

  1. Identify the goals of the design project:
    1. Attract a new customer base, and
    2. Increase sales.
  2. Determine the expected benefits:
    1. $20,000 x 25% increase in sales = $5,000.
  3. Calculate design project cost: $20,000
  4. Use the RoI formula to calculate the return on investment:
    1. ROI = ($5,000 – $20,000) / $20,000 = -75%
  5. Evaluate the results: The RoI is negative, indicating that the design project is not expected to be profitable.
  6. Consider any intangible benefits: The new customer base may lead to increased brand awareness and loyalty, which could have long-term benefits for the company.
  7. Evaluate the overall success of the design project: While the RoI is negative, the intangible benefits of the project may make it worthwhile for the company.

Best practices of how to calculate the RoI of a Design Project

Here are some best practices to consider when calculating the RoI for a design project:

  1. Clearly define the goals of the design project: It’s important to have a clear understanding of what you hope to achieve with the design project, as this will help you determine which benefits to include in the RoI calculation.
  2. Use conservative estimates: When estimating the benefits and costs of a design project, it’s best to use conservative estimates rather than overly optimistic ones. This will help you avoid overestimating the RoI and being disappointed if the actual results fall short of your expectations.
  3. Consider all relevant costs: Be sure to include all relevant costs in the RoI calculation, including direct expenses such as design fees and materials as well indirect costs such as the opportunity cost of not pursuing other projects.
  4. Consider the timing of benefits and costs: It’s important to consider the timing of when the benefits and costs of the design project will occur. If the benefits will be realized over a longer period, it may be necessary to use a discounted cash flow analysis to account for the time value of money.
  5. Regularly review the performance of the design project: The RoI of a design project is only an estimate, and the actual benefits and costs may differ from what was projected at the beginning. It’s also important to regularly review the project performance to see if it’s meeting the expected RoI and to make any necessary adjustments.
  6. Consider intangible benefits: In addition to the financial benefits of a design project, there may be intangible benefits that are difficult to quantify in financial value terms. These might include increased customer satisfaction, improved brand perception, or other benefits that are not easily measured in terms of money. Be sure to consider these intangible benefits when evaluating the overall success of the design project.

Common mistakes in the calculation of RoI of a Design Project

Here are some common mistakes that can occur when calculating the RoI for a design project:

  1. Overestimating the benefits: It’s important to be realistic about the benefits that a design project is likely to achieve. Overestimating the benefits can lead to an overly optimistic RoI calculation, which can be disappointing if the actual results fall short of expectations.
  2. Underestimating the costs: Be sure to include all relevant costs in the RoI calculation, including direct expenses such as design fees and materials, as well as indirect costs such as the opportunity cost of not pursuing other projects. Underestimating those costs can lead to an overestimation of the RoI.
  3. Failing to consider the timing of benefits and costs: If the benefits of a design project will be realized over a longer period, it’s important to consider the time value of money when calculating the RoI. Failing to do so can lead to an inaccurate calculation of the RoI.
  4. Failing to regularly review the design project performance: The RoI of a design project is only an estimate, and the actual benefits and costs may differ from what was projected at the beginning. It’s also important to regularly review the project performance to see if it’s meeting the expected RoI and to make any necessary adjustments.
  5. Ignoring intangible benefits: In addition to the financial benefits of a design project, there may be intangible benefits that are difficult to quantify in terms of financial value. These might include:
    1. Increased customer satisfaction,
    2. Improved brand perception, 
    3. Other benefits that are not easily measured in terms of money. Ignoring these intangible benefits can lead to an incomplete evaluation of the overall success of the design project.