Marketing & Finance
Cost-Benefit Analysis
Add every cost and benefit with an amount and get the net benefit and the benefit-cost ratio.
- Time: 20 to 40 min
- With: Project owner with finance input
- You get: A net benefit and a benefit-cost ratio you can defend
How to use this worksheet
- Decide the time frame (for example three years) and express every amount for that whole period.
- List every cost, including hidden ones like training, migration and maintenance.
- List benefits you can put a number on. Convert intangibles like fewer errors into money, or leave them out and mention them in the notes.
- Read the ratio, then test the biggest assumption: what happens if the largest benefit is half as big?
Costs and benefits
One row per item. Choose the type and enter the amount for the whole period.
Prompts
Ask yourself
- Which costs recur every year?
- Which benefit is least certain?
- Which costs or benefits did you leave out because they are hard to measure?
Write down where the numbers come from and what would change them.
Prompts and example
Example
Amounts cover three years.
Results
Before you finish
- All amounts cover the same time period.
- Recurring and one-off costs are both included.
- The biggest assumption has been stress-tested.
About cost-benefit analysis
Benefit-cost ratio = total benefits / total costs. Above 1.0 the benefits outweigh the costs. Net benefit is the difference.
A cost-benefit analysis is only as honest as its assumptions. Write them down, and look for the one assumption that would change the conclusion.
Recommended reading
Werbung / Ad: Affiliate links. As an Amazon Associate I earn from qualifying purchases at no extra cost to you.
- Cost-Benefit Analysis: Concepts and PracticeAnthony Boardman, David Greenberg, Aidan Vining, David Weimer
Comprehensive textbook on cost-benefit analysis theory and practice for public and private sector decision-making.
- A Primer for Benefit-Cost AnalysisRichard Zerbe & Allen Bellas
Accessible introduction to benefit-cost analysis with real-world applications and decision-making frameworks.