1) Pen Down Costs and Benefits
Firstly, write all the costs and benefits of the project that comes in your mind. After that, estimate the duration of the project.
2) Assign a Monetary Value to the Costs
Costs include physical resources costs, HR costs, furniture, rent, utilities, licensed software, work stations and all the stuff required to complete the project.
It is very important to think of as many costs as you can. Let say if you need to provide training to your developers or you need to outsource a module. In short, each and every cost will affect your project CBA.
You also have to think about costs that will add continuously, once the project is finished. For example, consider whether you will need additional staff, if your previous team need more training.
3) Assign a Monetary Value to the Benefits
When you have two arrangements of costs and benefits for the activity, allot monetary values to every individual cost or benefit. However, it is very important to assign monetary values to tangible and intangible benefits. For example, if you need to update any employee’s PC and it take several hours to accomplish. That particular time period will have negative effect on company as well as employee because there is no productivity.
4) Compare Costs and Benefits
Take the sum of the revenue(benefits) and the sum of the costs. After taking sum put the resulting value in the equation.
Sum of cost / Sum of revenue(benefits) = time duration (payback period).
The equation should be a numerical equation, and if the numerical benefits exceeds the costs, it is suggested to proceed with the decision. If not, the company or individual should re-examine the potential action and make adjustments accordingly.
1 thought on “2 Cost Benefit Analysis Examples”
Comments are closed.