Whether you’re still in the planning stages or have already started your own drone program the chances are, at some stage, you’ll need to demonstrate the cost savings and return on investment. Drones themselves don’t have to represent a huge capital expenditure, it’s the costs associated with making your drone strategy and workflows meaningful that can stretch the purse strings.
So how can you develop a measurable drone program that delivers a return on investment?
Overview
Whenever a business implements a new technology somebody somewhere gets nervous about the costs. How much is the initial outlay? How long will it be before we see a return? How long does the equipment last before needing to be replaced?
Being able to establish your KPIs early on is key to keeping the accountants happy, and important for you to be able to measure the success of your drone program and prove its worth to the business going forward. You need to identify upfront which workflows are being optimized. What data do you want to collect and what do you want to use it for? How will this save costs? Do you want to monetize your drone program or is it for internal use only? These are all questions you’ll need to ask yourself before getting started.
Why measure ROI?
You wouldn’t take out a savings account without knowing the interest rate, so measuring the financial impact of your drone program is no different. Somebody somewhere has invested that money and they will want to know that it was money well spent. If it’s come out of your own budget you yourself will want to know that it’s been a worthwhile investment in terms of time, money and effort.
You can only improve what you measure.
If you have no visibility of your achievements then you cannot evolve your business strategy in future. You need to know what worked, what the business benefits were, how much time was saved and how much money was saved. You can then use that as a business case to reallocate funds into other areas or develop your drone program further.
If your drone program has the aim of generating additional revenue you’ll need to be tracking your ROI to ensure that your pricing model is workable and your profit margins are forecasted accurately.
It’s important to note that ROI can only truly be measured after a set period of time has passed. For most businesses you’ll look at measuring this figure 12 months after the implementation of your drone strategy. Any sooner and your calculation would be skewed. ROI calculations can be forecast as part of a business plan but would need to be revisited for accurate business intelligence or accounting purposes.
Where is the ROI in a drone operation?
There are three main areas where you’d need to look to prove the ROI:
Time Saved
The ROI of your drone program will be directly linked to your industry and application, but one of the most compelling reasons to implement a drone program has always been the amount of time that could be saved using a UAV. We all know time equals money, so any time saved is a tangible return on investment.
Safety
Safety is another consideration in many industries. Aerial surveys and inspections cut the risk of harm to employees and can also mean that you don’t have to outsource specialist personnel or equipment.
Costs
If you’re a drone services company you’ll want to consider the ‘value metric’. For instance, if you’re a survey business, how much did a traditional survey cost you to complete? How many more surveys can you complete in the same time using a drone? If you’re progress monitoring construction sites a value metric would typically be the amount of money saved by new information which was previously unavailable.
Then there's the intangibles....
The Intangible Benefits of a Drone Program
Job Satisfaction
Job satisfaction is another intangible benefit. Safe employees are happy employees. If they don’t have to worry about risks as part of their day-to-day employees are more likely to remain loyal. People also like to know that they are working for a forward thinking business that wants to provide the latest tools and technologies to make their employee’s job easier.
But your business doesn’t make more money if your employees are happier. Or does it? Some studies say that it costs 6-9 months’ salary to recruit a new person just based on recruitment and training expenses, let alone the loss of productivity while you find a replacement.
PR & Credibility
Some value metrics can be intangible, like the PR and marketing benefits. When you implement a drone strategy you are telling your customers that you will use the latest technology to help them achieve their business goals. This builds your credibility. You’ll also be able to use the data and equipment to help you market your business or services. If this is a new area of business, or simply a new way of doing things, it can be hard to see a monetary ROI.
By implementing a drone program your value proposition increases exponentially. You’ll get more clients, expand your range of services and potentially be able to market services to new verticals. But how do you measure potential?
This is why business planning is essential in the development of a drone strategy. When measuring the success of your drone program you will want to include at least a 3 year plan and ROI forecast to help you stay on track.
How do you measure ROI?
Depending on the size of your business you may have to provide a full breakdown of all costs before your drone program even gets off the ground. This is good practice for anyone as without keeping track of your costs you’ll never be able to prove ROI in future.
This is where you’ll need to start:
Start by creating two separate lists – one for costs, one for savings. If you intend on generating revenue from your drone program these can go in the second column.
Your cost of investment list should include everything from the capital expenditure of the equipment, software, training, vehicles, insurance, consultancy fees, any additional marketing spend – any costs associated with getting started.
The next column should contain all of your savings and/or revenue – let’s call it net income. If you’ve always outsourced your drone services this can go in the second list. If you are creating a forecasted ROI and know that you can complete twice as many surveys as you did the previous year, multiply your sales revenue from last year and add this to the list. If you have made old equipment and their maintenance costs redundant, include these. If you’ve managed to slim down your workforce include the salary savings too.
Once you have your figures, this is the calculation:
Net income / Cost of investment x 100 = Your ROI %
Are you looking for help calculating the potential ROI on your drone program?
How long before you see ROI?
The first year’s ROI figure can be depressing for some businesses, but any new business strategy needs time to work. This is why forecasts are important in determining the ROI of any drone program. In years two and three drones will have become a core part of your business and running costs will be reduced. All of your staff are trained, your customers are aware of your new offering and equipment has already been purchased. This is when you start to see the scales balance and then become favorable.
The amount of time it takes to enter into a positive position will obviously depend on your level of investment, complexity of your operation and scope for growth. If you already have staff who buy into the project your adoption of drone technology will run more smoothly and quickly as training existing staff can be a great benefit for both sides.
Making your drone program manageable is as important as making it measurable. That all comes down to planning.
Summary
The scope for drone data is huge. Once you start looking at the potential applications, savings and overall business benefits it’s easy to see why widespread adoption has been so swift. Looking at the bigger picture can be distracting when you’re trying to focus but it’s key when it comes to persuading decision makers that a drone program is a good idea.
Be clear when stating your case and delivering your proposal to key decision makers because any investment will take time to mature. There’s no such thing as a quick win, but drone programs can deliver a healthy ROI sooner than you may think.
If you need some help convincing people that an in-house drone program is a good idea our
Top 5 Considerations article is a great place to start.
About Us
Hammer Missions is a software platform that helps drone (UAV) teams work with versatile & high-quality drone data for site surveys and asset inspections. Our goal is to help businesses cut costs and increase ROI by building operational efficiency in their drone programs.
Hammer Hub is a cloud-based platform where drone data can be processed and visualized in a full 3D environment. This data can also be annotated using AI to accelerate the annotation process, and it can then be shared with other team members or stakeholders within the organization for further review – a great benefit when working with a digital twin.
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