"Is this POS system worth it?" It's the question every owner asks—and most can't answer with real numbers. Let me show you exactly how to calculate your POS ROI so you can make data-driven decisions.
The Basic ROI Formula
POS ROI Formula
ROI = (Gains - Costs) / Costs x 100
Simple enough, right? The challenge is knowing what to count as "gains" and what counts as "costs." Most people only think about the obvious ones and miss the hidden factors that make or break your actual return.
What to Count as Costs
Obvious Costs
- Hardware purchase/lease
- Monthly software fees
- Payment processing fees
- Installation costs
Hidden Costs
- Staff training time
- Menu programming hours
- Integration setup
- Productivity loss during transition
What to Count as Gains
Revenue Gains
- Faster table turns = more covers
- Upsell prompts working
- Reduced walkouts from long waits
- Online ordering revenue
Cost Reductions
- Lower shrinkage/theft
- Reduced comps from errors
- Labor efficiency savings
- Lower payment processing rates
Real-World Example
Case Study: Sports Bar, $1.2M Annual Revenue
Year 1 Costs: $15,000 (hardware, setup, training)
Monthly Fees: $200/month = $2,400/year
Total Investment: $17,400
Shrinkage Reduction: $8,400/year (0.7% improvement)
Labor Savings: $6,000/year (reduced hours needed)
Revenue Increase: $12,000/year (faster service)
Total Gains: $26,400
ROI: ($26,400 - $17,400) / $17,400 x 100 = 52%
The Payback Period
ROI percentage is useful, but payback period tells you when you break even:
Payback Period
Total Investment / Monthly Gains = Months to Break Even
In our example: $17,400 / $2,200 monthly gains = 7.9 months to break even. After that, it's pure profit improvement.
Red Flags in ROI Calculations
Watch out for these when someone shows you ROI projections:
- Ignoring transition costs - The productivity hit during switchover is real
- Overstating revenue gains - A POS doesn't magically bring in customers
- Forgetting ongoing fees - That "free" system has monthly costs forever
- Not comparing apples to apples - Compare to your current total cost, not just software fees
A good POS investment should show positive ROI within 12-18 months. If someone's projecting 3+ years to break even, either the system is overpriced or they're underestimating gains. Either way, dig deeper.
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