Last week, we pulled together a squad of drone industry experts from across Skyward and a special guest from Verizon for a webinar. We talked about one of the issues that’s top of mind for just about every drone program manager this year: budgeting.
It’s no secret that 2020 has been a rough year on most companies’ budgets, from small businesses to large enterprises. As we’ve talked with these companies, they’ve singled out securing budget as one of the top challenges their drone programs are facing. Some are looking at operating with reduced resources. Others have had their funding pulled altogether.
We know that making the case for budget can be difficult. So we wanted to provide a free resource to help businesses and enterprises assess the dollar value of their drone program: an ROI calculator.
We discussed this calculator in the webinar and provided it to everyone who registered. If you weren’t able to join, watch the on-demand replay, and you can download it there.
How do I use the drone program ROI calculator?
First off, you’re going to need to pull together some numbers in three primary areas:
1) Inputs and assumptions
These inputs and assumptions will probably be the most straightforward part of your calculation. These are easy items like:
- Hourly wage rate
- Average number of jobs per year
- Number of worker hours to perform a job with the traditional method
- Number of worker hours to perform a job with drones
These will help you estimate a cost per job, cost per hour, and annual job cost. They’ll also help you quickly calculate your savings per job.
2) Returns and savings
If you’ve completed the “Inputs” section, you’ve already started looking at your returns. Cost reductions start with time savings. But you also need to look at the additional benefits a drone program can bring. The ROI calculator looks at several categories, including:
- Increased safety
- Equipment replaced by drones
- Faster access to data
- Environmental compliance improvements
- Additional revenue streams
- Support for remote work environments
Not all of these will apply to your company, and you may want to add other categories. Either way, they’re helpful to think through. It may be difficult to quantify the annual returns or dollar savings for some, but the more measurable it is, the better. Together with your initial inputs, this will help you estimate your total return.
3) Investment in Drone Program
Now you have to crunch the numbers for your program’s expenses. This is subdivided into two categories: CapEx and OpEx. Don’t be too intimidated by those terms.
CapEx, or Capital Expenditures, are the funds used to acquire, upgrade, and maintain physical assets. This is going to include things like:
- Drones and hardware – tablets, batteries
- Accessories – sensors, landing pads
- Safety equipment – high visibility vests, hard hats
OpEx, or Operating Expenditures, are the ongoing operational costs for running a product or system. This can cover a lot of expenses and services, such as:
- Pilot training
- Part 107 exam
- Operations management platform
- Data connectivity
- Systems integration
Think long-term versus short-term benefit here. CapEx is used to acquire assets that will have a long-term benefit greater than one year, and capital expenses often have a separate budget. OpEx is the short-term costs for running the business, and while necessary, they aren’t the same profitable investments as capital expenses.
If you have questions about where a specific purchase would fall, tap into your finance team’s expertise. In fact, here’s a best practice that will save you a lot of headaches: network with your finance team long before launching a program. They’ll be very helpful along the way as you plan.
How does estimating ROI help me budget for 2021?
Once you have your inputs, returns, and investments accounted for, you can really start looking at your return on investment. The ROI calculator will give you an overview of your benefit-to-cost ratio, your annual ROI over the first three years, and your total savings. It’s not a perfect tool, and of course you may end up encountering unexpected expenses. But you may also find savings in places you hadn’t considered.
So how can you leverage this information to help your drone program? Well, ultimately, ROI is going to be the sustaining force that secures funding for your program — not just how cool the technology is or what it may be able to do in the future. Being able to share quantifiable data with your executives to justify funding your program is an important step toward securing budget. This is true whether you’re launching a drone program for the first time or making sure your ongoing program gets some line items for 2021.
We shared a lot more tips and tricks for budgeting in our webinar, Budgeting for an Enterprise Drone Program, including how Verizon is managing their own enterprise-scale drone program. Check it out to download the ROI calculator and watch the replay.