AI Savings Calculator

How the AI Savings Calculator Works

This calculator estimates the financial impact of applying AI to routine (“automatable”) work across a team. It quantifies:

• Annual Net Savings (run-rate) from time saved minus tool costs
• 5-Year Net Savings after one-time transition costs
• EBITDA Impact (annual) — equal to Annual Net Savings
• Valuation Impact — Annual EBITDA impact × your selected EBITDA multiple

Use it to sanity-check magnitude before committing to a pilot or rollout.

Key Concepts (plain English)

• % Time on Automatable Tasks: Share of a role spent on repeatable, rules-based, or pattern-heavy work (e.g., ticket triage, first-pass drafting, test scaffolding).
• Productivity Gain from AI: How much faster the automatable portion becomes once AI is in the loop.
  Interpreted as a speed-up: 0% = no change; 100% = 2× faster; 200% = 3× faster.
• Transition Costs: One-time expenses to adopt AI (training, process design, prompt assets, integrations, change management).
• EBITDA Multiple: Rule-of-thumb for valuing incremental EBITDA (often 8–12× in software/tech-enabled services).

What the Calculator Assumes (math)

Variables

• N = employees affected
• C = fully-loaded annual cost per employee
• A = % time on automatable tasks (0–1)
• G = productivity gain (%) as speed-up (e.g., 100 → 2×)
• T = one-time transition costs
• M = EBITDA multiple
• K = tool cost per developer per year (shown above results)

Derived

• speedMultiplier = 1 + G/100
• savedOnAutomatable = 1 − 1/speedMultiplier
• totalRoleTimeSaved = A × savedOnAutomatable

Formulas

• Annual Gross Savings = N × C × totalRoleTimeSaved
• Annual Net Savings = Annual Gross Savings − (N × K)
• 5-Year Net Savings = (Annual Net Savings × 5) − T
• EBITDA Impact (annual) = Annual Net Savings
• Valuation Impact = EBITDA Impact × M

Prefer the annual run-rate lens for EBITDA and valuation. Five-year totals are useful for budgeting but shouldn’t be divided by a multiple.

How to Use It (3 steps)

1. Describe your scope
   • Enter the number of employees whose work includes automatable tasks.
   • Use fully-loaded cost (salary + benefits + overhead).
2. Set your impact levers
   • Adjust % Automatable to reflect how much of each role is pattern-heavy (20–40% is common in engineering orgs).
   • Set Productivity Gain as the speed-up on that portion (e.g., 50–150% during early adoption; higher with mature prompts/agents).
   • Add Transition Costs (training, pilot time, build vs. buy, integration).
3. Sanity-check the outputs
   • Focus on Annual Net Savings (run-rate) and Valuation Impact.
   • Use 5-Year Net Savings to assess payback vs. one-time costs.

Example (typical mid-sized team)

• Inputs: N = 10 engineers, C = $150k, A = 30%, G = 100% (2× on automatable portion), K = $1,200, T = $50k, M = 10×
• Time saved: 0.30 × (1 − 1/2) = 15% of role time
• Annual Gross Savings: 10 × 150k × 0.15 = $225,000
• Tool Cost: 10 × 1,200 = $12,000
• Annual Net Savings (EBITDA): $213,000
• 5-Year Net Savings: 5 × 213k − 50k = $1,015,000
• Valuation Impact: 213k × 10 = $2.13M

Interpreting Results

• If Annual Net Savings is small or negative: Scope may be too broad, automatable share is low, or you’re early (transition costs dominate). Try a narrower, high-volume workflow first.
• If results look unusually large: Pressure-test A and G. Sustained 200–300% gains typically require productionized agents, clean knowledge bases, and process changes.

Good Input Ranges (to avoid wishful thinking)

• % Automatable (A): 10–50% for most knowledge roles; higher only with strong standardization.
• Productivity Gain (G): 50–150% for pilots; 150–250% for mature, well-tooled teams.
• Multiple (M): Use your board’s/banker’s; if unsure, start at 10× and sensitivity-check ±2×.

Limitations & Tips

• Adoption ramp: Real programs ramp (e.g., 25/50/75/100% through Year 1). Treat the calculator as steady-state; apply a ramp externally if needed.
• Quality guardrails: Time saved matters only if quality holds or improves (add reviews, evals, and rollback plans).
• Heterogeneous roles: If teams mix very different roles, run the calculator per role and sum results.
• Custom tool cost (K): Replace the default with your negotiated per-seat or per-usage economics.