I’ve seen it a hundred times. A founder reads a few blog posts about AI, gets all excited, and a few weeks later, their product is bloated with a bunch of half-baked “AI features” that nobody uses. The team is frustrated, the product is a mess, and the founder is left wondering why their genius idea didn’t take off.
Sound familiar? I’ve been there. Early in my career, I made the same mistakes. I was so focused on the tech that I forgot about the business. I was building features that were cool, but didn’t actually solve a problem for my users. And I was paying the price for it.
It wasn’t until I had a couple of successful exits under my belt—RemoteTeam, which was acquired by Gusto, and MovieLaLa, which was acquired by Gfycat—that I really understood the importance of ROI. And I’m not talking about some complicated, data-science-heavy formula that takes a team of PhDs to figure out. I’m talking about a simple, back-of-the-napkin calculation that any founder can do in a few minutes.
This is the guide I wish I had when I was starting out. It’s not a bunch of generic advice that you can find anywhere. It’s a step-by-step playbook for founders who need to move fast, get results, and build products that people actually want to use.
The Problem with Most “AI” Features
Let’s be honest. Most “AI” features are just a fresh coat of paint on an old idea. They’re a solution in search of a problem. And they’re a huge waste of time and money.
I’ve seen founders spend months and hundreds of thousands of dollars building a “smart” recommendation engine, only to find out that their users are perfectly happy with a simple search bar. I’ve seen teams build a “personalized” onboarding flow that’s so complicated, it actually scares users away.
And the worst part is, these founders think they’re being innovative. They think they’re on the cutting edge of technology. But in reality, they’re just following the herd. They’re building what they think they’re supposed to be building, instead of what their users actually need.
The Simple Way to Calculate ROI
So how do you avoid this trap? How do you make sure that you’re building AI features that will actually move the needle for your business? It’s simple. You need to calculate the ROI.
And here’s the formula:
ROI = (Gain from Investment - Cost of Investment) / Cost of Investment
That’s it. It’s not rocket science. But it’s the most important calculation you can make as a founder.
Let’s break it down.
Gain from Investment
This is the part where most founders get it wrong. They focus on the wrong metrics. They get excited about things like “engagement” and “time on site,” but they forget about the one metric that really matters: revenue.
At the end of the day, the only reason to build a new feature is to make money. And if you can’t draw a straight line from your new feature to an increase in revenue, then you shouldn’t be building it.
So how do you calculate the potential gain from your investment? Here are a few ways to think about it:
- Increased Customer Lifetime Value (LTV): Will your new feature make your customers stick around longer? Will it make them more likely to upgrade to a paid plan? If so, you can calculate the potential increase in LTV and use that as your gain from investment.
- Increased Average Revenue Per User (ARPU): Will your new feature allow you to charge more for your product? Will it open up new revenue streams? If so, you can calculate the potential increase in ARPU and use that as your gain from investment.
- Reduced Churn: Will your new feature make your customers less likely to cancel their subscriptions? If so, you can calculate the potential reduction in churn and use that as your gain from investment.
Cost of Investment
This is the easy part. The cost of your investment is simply the cost of building and maintaining your new feature. This includes things like:
- Salaries: The salaries of the engineers, designers, and product managers who are working on the feature.
- Infrastructure: The cost of the servers and other infrastructure that you need to run the feature.
- Opportunity Cost: The cost of not working on something else. This is the one that most founders forget about, but it’s the most important. Every hour that you spend working on one feature is an hour that you’re not spending on another. So you need to be sure that you’re working on the right thing.
A Real-World Example
Let’s say you’re building a project management tool, and you’re thinking about adding a new AI-powered feature that will automatically assign tasks to the right person on your team. Here’s how you would calculate the ROI:
Gain from Investment:
Let’s say that your tool costs $10 per user per month. And let’s say that you have 1,000 users. That’s $10,000 in monthly recurring revenue (MRR).
Now let’s say that you believe that your new AI-powered feature will reduce churn by 10%. That means that instead of losing 50 users every month, you’ll only lose 45. That’s a savings of 5 users per month, or $50 in MRR.
Over the course of a year, that’s a savings of $600. And if you can keep that up for a few years, you’re talking about a significant amount of money.
Cost of Investment:
Let’s say that it will take two engineers three months to build the feature. And let’s say that your engineers cost you $10,000 per month each. That’s a total cost of $60,000.
ROI:
So the ROI of your new feature is:
($600 - $60,000) / $60,000 = -0.99
That’s a negative ROI. Which means that you shouldn’t build the feature. At least not yet.
The Counterintuitive Part
Now, here’s the counterintuitive part. Just because a feature has a negative ROI today doesn’t mean that it will have a negative ROI tomorrow. The cost of AI is dropping every day. And the power of AI is increasing every day.
So the feature that has a negative ROI today might have a positive ROI in six months. Or a year. Or two years.
This is why it’s so important to have a long-term vision for your product. You need to be able to see where the puck is going, not where it is today. And you need to be willing to make bets on the future.
When we were building RemoteTeam, we knew that the future of work was remote. We were a fully remote team ourselves, and we were building a product for other remote teams. We were betting on a trend that we knew was going to be huge.
And we were right. When the pandemic hit, the world went remote overnight. And we were in the right place at the right time. We were acquired by Gusto, and we were able to help millions of people work from anywhere.
My Final Take
Don’t get caught up in the hype. Don’t build AI features just for the sake of building AI features. Be ruthless about ROI. And be patient. The best things in life take time. And the best products are built by founders who are willing to play the long game.
I’ve made over 200 angel investments in companies like Anthropic, OpenAI, Scale AI, and Hugging Face. And the one thing that all of these companies have in common is that they’re run by founders who are obsessed with solving a real problem for their users. They’re not just chasing the latest trend. They’re building something that they believe in. And they’re in it for the long haul.
So if you’re a founder who’s thinking about building an AI feature, my advice to you is this: Do the math. Be honest with yourself about the potential ROI. And if the numbers don’t work, don’t be afraid to walk away. There will always be another opportunity. And the one that you choose to pursue should be the one that has the best chance of success.
Frequently Asked Questions
How long does it take to calculate the roi of a new ai feature (the simple way)?
The timeline varies depending on your starting point and resources. For most founders, expect 2-4 weeks for initial setup and 2-3 months to see meaningful results. I've seen teams move faster when they focus on one thing at a time rather than trying to do everything at once.
What tools do I need to get started?
Start with the basics. You don't need expensive software or fancy tools. A spreadsheet, a note-taking app, and direct access to your customers will get you further than any enterprise platform. Add tools only when you hit a specific bottleneck.
Do I need technical skills to calculate the roi of a new ai feature (the simple way)?
Not necessarily. While technical understanding helps, the most important skills are clear thinking and the ability to break problems into smaller pieces. Many successful founders I've invested in started with zero technical background and either learned enough to be dangerous or found the right technical partner.