LMS ROI: Is Your LMS Profitable?

Return on investment is a key performance indicator that tells you whether the money you’re spending on something—a marketing campaign, new product, or technology upgrade—is driving more money than it’s costing. The same formula can be applied to your learning management system (LMS).

The ROI of your LMS helps justify the expense of your platform to stakeholders. You’ll be able to confidently say how much money you’re making on every dollar invested. The calculation can also fine-tune your learning and development strategy since you can make decisions about your training courses based on the financial return they’ll provide to the business. 

Unfortunately, calculating LMS ROI isn’t as straightforward as it might seem. There are less obvious advantages and hidden costs that you need to uncover to use the formula accurately. This guide shares how to do it, with tips on how to calculate your LMS ROI and maximize the figure if it’s less than stellar.

What is your LMS ROI?

LMS ROI is the value you get back after investing in your learning management system. It’s a simple calculation that helps you measure whether the money they’ve spent on their LMS is providing a financial return for the business. 

By calculating the ROI of your LMS, you can prove the value of the platform to stakeholders—like the fact that employees are building skill sets that ultimately result in higher sales, happier customers, or higher employee retention. That’s the first step in acquiring more budget for your L&D programs and ultimately driving growth for the organization.

How to calculate the ROI of your LMS

Calculating the return on investment of your LMS isn’t an easy calculation, but we’ll walk you through each step to ensure you’re confident with the figure at the end. 

1. LMS ROI Formula

The LMS ROI formula is the calculation you’ll use to determine whether your platform is making more money than your business spends on it. Here’s what it looks like:

LMS ROI = (Net benefits / total cost of LMS) x 100

Start by calculating the total investment, which is every penny you’ve put into your learning management system both directly and indirectly. This includes direct costs associated with the platform (such as subscription, implementation, or content licensing fees), as well as the cost of training employees on how to use the software. 

Next, calculate the net benefits, which is every positive impact you’ve experienced since using the LMS over the period you’re calculating ROI for. That includes:

• Time savings: How much time have you saved on training techniques like virtual learning, as opposed to the traditional method of hiring a meeting room and requiring all employees to attend at the same time? 
• Revenue increase: Think about the reduction in costs associated with your old L&D programs like travel expenses, venue rental, or printed learning materials. 
• Productivity growth: How many more tasks or activities can your employees complete in a day now compared to pre-LMS implementation? A platform with a search function might help them locate specific training courses and get quick answers to their questions (as opposed to Slack messaging their colleagues and waiting for a response), which frees up more time to focus on their actual role.
• Improved decision making: The best LMS software has analytics and reporting features that prove whether your training programs are meeting their learning objectives. These insights help you make better decisions since you’re relying on user behavior signals, rather than gut instinct. That’ll undoubtedly save you money in the long run. 
• Process improvement: From onboarding new hires to mandatory annual compliance training programs, your LMS should be automating these processes (perhaps using artificial intelligence) and saving you time completing repetitive tasks, while also making the employee experience consistent. 

2. Calculate intangible internal benefits

The net benefits we’ve outlined above are the most obvious performance indicators. But just like any ROI calculation, there are intangible benefits that are more difficult to quantify, but just as important to consider when formulating your LMS ROI. That might include:

• Improved employee satisfaction and retention: Studies have shown that 39% of employees will consider leaving their job if they don’t receive regular training or development opportunities. Simply retaining your team with your new LMS initiatives can save you the equivalent of six to nine months of each employee’s annual salary that you’d otherwise spend recruiting and training new staff. 
• Reduced customer churn: It’s your customers who reap the rewards of your employee training initiatives, especially if your learning materials help teammates build their product knowledge and prepare for difficult customer service interactions. 
• Improved customer satisfaction: If you’re training customer service teams using role-playing through your LMS, for example, they’ll know how to interact with customers at every stage of the buyer’s journey. This leads to higher customer satisfaction from people who will ultimately spend more money with your business.  
• Stronger learning culture: Your LMS consolidates all training materials and resources into a single platform, helping employees locate the content they need. Simply removing these barriers to education can encourage team members to spend more time learning, which builds a stronger culture of learning within the organization.
• Mitigating risks: Cybersecurity, workplace safety, and fraud all pose risks to a business. Using your LMS to regularly train employees on these topics can protect the company from data breaches, health and safety incidents, or legal issues. 

3. Use the LMS ROI weighted estimation

The weighted estimation method takes into account the intangible benefits that your LMS has provided. It’s calculated using this formula:

LMS ROI weighted estimation = (Total weighted benefits — total weighted costs / total weighted costs) x 100

Benefits that are more important to the business should have a higher weight—like compliance training. Benefits that are less of a priority (but still important nonetheless) would have a lower weight.

Once you’ve assigned a weight to each tangible benefit, multiply the weight by the estimated financial benefit. In the case of compliance training: you might net $50,000 from your programs annually, but if it’s weighted at 0.60, you’d use $30,000 for the LMS ROI weighted estimation.

It takes trial and error to work out how much weight your benefit should hold and the value of each. Play around with your weighted figures and get insight from stakeholders—including directors, business leaders, or managers—to make sure the data is as accurate as can be.

4. Measure opportunity costs

Opportunity cost shows how the business would be financially impacted if the LMS wasn’t in play. 

We can see this in action with a big business that’s using an extended enterprise LMS to train its employees. It doesn’t currently automate any workflows, nor does it use the same platform to train customers. This is costing the business both time and money. You’re spending hours each week on repetitive tasks and investing in two separate platforms to train customers and employees.

The opportunity cost would measure that shortfall and help prioritize improvements to their LMS. Using the same example: automation might be weighted at 0.6 and have a cost of $50,000. If that figure tips your LMS ROI calculation in the opposite direction, you should prioritize it when altering your LMS strategy. 

Tips for maximizing your LMS ROI

After calculating your LMS ROI, you might find that it’s not as profitable as you initially thought. Luckily, you don’t need to overhaul your entire process to make your LMS investment drive financial returns for your business. Here are some tips to maximize your LMS ROI.

Choose an LMS (and stick with it)

The LMS ROI calculation takes the total cost of implementation into account. If you’re switching platforms throughout the reporting cycle, it bumps up the total investment you’ve made into LMSes because you’ll likely be paying for multiple subscriptions, onboarding fees, content licenses, or customization add-ons.

Businesses tend to migrate their LMS if it’s lacking the features they need as their business grows. Your best bet is to choose an LMS that will scale as the company does. Even if you don’t need the features right now, it’s oftentimes more cost-effective to pay a higher subscription fee in the short term than to migrate to another platform once you’ve already rolled out your training programs in a limited platform.

WorkRamp’s All-in-One Learning Cloud is designed to grow with your business. Train employees, customers, and partners from a single LMS, so you’ll only ever pay to operate one LMS, regardless of who you’re training. 

“We’ve been using WorkRamp since we had 21 reps on the revenue team, and now we’re at about 170,” says Lissa Songpitak, Head of Revenue Enablement at Enable. “The platform enables organizational agility and collaboration that has been essential in helping us through growth and scaling.” 

Establish consistent reporting

The best way to maximize value from your LMS is to rely on your analytics. Consult your reporting dashboard regularly to find out:

• Whether training materials are meeting their learning objectives (and therefore, helping you reach company-wide goals)
• If employees are satisfied with the training materials on offer and are completing the courses on offer
• Whether you have any skills or knowledge gaps that could be filled with further training

Consistently checking in with your LMS analytics is the only way to make strong decisions or adjustments to your L&D strategy. You might trim down your health and safety course based on a gut instinct that it’s too lengthy, for example, but the data could prove otherwise. The course has one of the highest completion rates, therefore changes to it shouldn’t take priority over materials with a lower learner pass rate.

Scale using automation

There’s a finite number of hours in the day; you can’t waste all of yours on repetitive tasks inside your learning management system. Automation is the key to freeing up your time to focus on higher-impact (and therefore, higher ROI) tasks. 

Popular use cases for automation inside an LMS include:

• Enrolling new learners in courses
• Building customized learning paths based on job roles
• Sending notifications when compliance training courses are due for renewal
• Assigning points or certificates that incentivize learning
• Creating reports to analyze learner and content performance

Remember: the more time and effort you spend on the administrative tasks inside your LMS, the more money you’ll have to earn back to achieve a positive ROI. 

Regularly update training and courses

Learning management systems provide a positive ROI when the benefits outweigh the financial cost of using them. The quality and accuracy of your learning materials hugely influence those benefits. Only with accurate, up-to-date, and engaging training courses can you experience an uplift in employee participation and a bolstered skill set with the knowledge to pass on to your customers.

Set regular reminders to comb through existing training materials and identify areas for improvement. Gather feedback from learners to draft up a priority list of courses to refresh, then check for things like:

• Have the business’ goals changed?
• Has your company’s stance or opinion on a topic changed?
• Is the content still accurate and relevant using today’s best practices and regulations?
• Are there any knowledge gaps that need to be addressed in an update?
• Have you covered any new products, services, or features that have been released since the original content was posted?

Conduct user surveys

Treat the content refreshing process as an opportunity to expand your offering and cater to different learning styles. If you have a sales training webinar that was published in 2023, for example, the content is likely still relevant but it might have a low learner completion rate and poor scores on the end-of-module quiz.

Further feedback from your learners shows that they couldn’t grasp the concept through a video alone. So, you update your training courses to include a written transcript of the webinar and a series of flashcards at regular intervals throughout the video. Just like that, you’ve catered to two more learning styles by repurposing content you’ve already produced.

The best LMSes have native surveying features to gather this feedback without the need (or cost) of additional software. WorkRamp, for example, has interactive content features such as quizzes, polls, and surveys for you to gather feedback from learners and fine-tune your L&D initiatives accordingly. 

Choose an LMS with proven ROI

Granted, there are tips and tricks you can use to increase the ROI of your learning management system, but the activity that’ll make the biggest positive impact is choosing an LMS that’s fit for purpose in the long term.

WorkRamp’s All-in-One LMS has all of the features you need to cut down the time you spend on repetitive tasks and deliver the learning experiences that your students need.

Want to learn more about how to maximize value from your LMS? Contact us today to schedule a free personalized demo. 

Introducing WorkRamp CMS for Employee Learning Cloud