How to Maximize ROI on Digital Investments for MSMEs
✍️ Opinions
This article has been contributed by Aleksandra Malhotra, Director of Kladana.
Small businesses prioritize quick returns over long-term digital investments. They need solutions that cut costs and show immediate results: fast order processing, raw materials always in stock, and invoices paid on time. SMEs want to automate all their processes on one platform and easily manage inventory, sales, and manufacturing.
While it’s tempting to jump into new technologies right away, small businesses face a tricky path to achieving maximum ROI. With limited budgets, the need for employee training, and the constant need to adjust processes, MSMEs must be strategic in their approach. The challenge isn’t just picking the right digital solutions, but how to adapt them to a business’s specific needs and growth plans.
The best way forward? Identify a problem, implement a solution, measure the impact, and then move on to the next step.
Choosing the Right Digital Tool
Not all technologies deliver equal ROI. Hence, small businesses should invest in tools that directly impact revenue, profitability, and cost reduction.
ERP and Automation
ERP systems help entrepreneurs reduce mistakes, set up smooth workflows, improve team collaboration, and view real-time data. A company can easily manage inventory, orders, and warehouses from one platform.
Marketing and Sales
Investing in tools like CRM, advertising, and analytics can boost conversions, generate leads, and help retain customers. Analytics track item sales, identify best-sellers for reordering and reduce costs on non-profitable products.
For example, Artisanté, an Indian food manufacturer, cut down the time spent on restocking raw materials. With ERP, the purchasing manager can now see sales estimates, calculate what raw materials are needed, and create purchase orders right away.
Logistics and Inventory
Efficient inventory management helps MSMEs avoid stockouts and overstock and reduce transportation costs by maintaining the right stock levels and minimizing waste.
For instance, Neytt, an Indian carpet manufacturer, used to track inventory manually across ten locations, which took up a lot of time and resources. After they started using an ERP system, they brought all inventory management together, made stocktaking faster, and removed repetitive tasks, giving them more time to grow their business.
Online Sales Channels
Selling through online marketplaces and e-commerce platforms helps businesses expand their reach and boost sales. Integrations with platforms like WooCommerce and Shopify make it simple to set up and manage an online store.
Automating Core Business Processes
Cloud-based ERP solutions allow SMEs to avoid high upfront costs while providing real-time data for better decision-making.
Key Automation Benefits
- Boosted Efficiency: Automation speeds up tasks and lets employees focus on more important work. For example, software can automatically track stock levels, freeing up staff to handle more critical tasks.
- Lower Costs: By reducing errors and repetitive tasks, automation cuts labour and overhead costs.
- Better Accuracy: Standardized processes mean fewer mistakes and more reliable results.
- Instant Insights: With real-time data, businesses can make quick, informed decisions.
- Happier Customers: Faster, mistake-free orders lead to better customer satisfaction and loyalty.
- Scalability: As your business grows, automation can handle more tasks without extra costs.
- Faster Order Processing: Automating orders speeds up the entire process, from order placement to delivery.
- Easier Financial Control: Automated reports and invoices save time, allowing teams to focus on growth strategies instead of paperwork.
For example, Metako, a steel door manufacturer, implemented ERP to automate warehouse management, cutting down inventory losses and logistics costs. Similarly, Hey Baby, an apparel manufacturer, uses ERP analytics to guide decision-making. By tracking item sales, they identify best-sellers to bring back each season, helping reduce costs on less profitable products.
Shubham Kumar
KPI and Analytics: Measuring ROI on Digital Investments
To measure success, companies should measure the following key metrics:
1. Customer Acquisition Cost (CAC)
The cost to acquire a new customer includes all marketing and sales expenses divided by the number of new customers gained in a period. Track CAC to see how your marketing efforts are performing. If your CAC is too high, focus on improving your sales funnel or targeting more qualified leads.
Example:
A small e-commerce business spends $10,000 on digital marketing (ads, social media, etc.) in a month and acquires 200 new customers.
CAC = $10,000 ÷ 200 customers = $50
This means it costs the business $50 to gain one customer. The goal is to reduce CAC over time as marketing strategies become more efficient.
2. Lifetime Value (LTV)
The total revenue generated from a customer over time. A higher LTV means that the business can afford to spend more on acquisition. Focus on increasing LTV by improving customer retention, offering loyalty programs, and providing excellent customer service.
Example:
A customer buys products from an online store for $100 every month. Over 2 years, they continue to make purchases.
LTV = $100 × 12 months × 2 years = $2,400
Knowing the LTV helps businesses set acquisition budgets because they know how much profit one customer can generate.
3. Operational Efficiency
Time saved on order fulfilment, reduced manual work, and cost savings. This directly impacts ROI by freeing up time for more valuable activities. Look for areas where automation can help save time, like inventory management, order processing, or financial reporting.
Example:
A company that used to take 10 hours a week to process orders now automates the order process with ERP software, reducing time spent to 2 hours a week. That’s 8 hours saved every week, which can be used for growing the business.
4. Revenue and Profitability Growth
The overall financial impact of digital tools. By analyzing data on sales performance and operational costs, you can determine whether the tools are driving growth. Use data to identify profitable trends and focus efforts on areas with the highest return. For instance, using CRM data to target the most profitable customer segments can increase sales efficiency.
Example:
A company implements a CRM system to manage customer relationships. As a result, their repeat customer rate increases from 20% to 40%. This boosts sales by 25% in the first quarter after implementation.
Common Mistakes That Reduce ROI and How to Avoid Them
While digital tools can transform your business, some mistakes can reduce their value.
Overcomplicating Implementation
Trying to do everything at once can overwhelm your team. Start with one process, like handling sales orders and quotations, then gradually add more as your team gets comfortable with the new tools.
Failure to Train Employees
Even the best tools won’t work if your team doesn’t know how to use them. Make sure employees are properly trained and offer ongoing support to improve adoption and prevent delays.
Lack of a Clear Strategy
A digital transformation needs a clear plan. Set short-term goals, long-term objectives, and measurable results. For example, start by digitizing quality control, then expand to other areas as part of a staged approach to reduce defects.
To sum it all up, small business owners cannot wait 3–5 years to see the impact of digitalization. They need to make improvements today and see results tomorrow. That’s why the best approach is a step-by-step strategy: identify a problem, implement a solution, evaluate the impact, and move forward.
Digital technologies are not just a trend — they are a strategic tool for growth. Choosing the right starting point, considering implementation complexity, and taking a phased approach ensures that small businesses maximize ROI and scale without chaos.
Shubham Kumar
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