Cost Benefit Analysis Basics

All organizations should invest some time into business case analysis, investigating the pros and cons of any new endeavor before launching the project. In some ways a cost benefit analysis is similar to a return on investment report, but it presents similar information in different ways. The purpose of analyzing the costs and benefits is to determine how well, or poorly, a proposed idea will pan out. This type of analysis is generally done for financial purposes to determine if a new project will make money or cost a company money in the long term.

This analysis is done by adding up the monetary value of all the positive features, and subtracting the monetary value of the negative aspects. This will result in a positive or negative number. The positive number tells you how much you are likely to profit from the completed project, and a negative number will indicate the amount of money you are likely to lose from investment in the project.

A break even analysis is another tool that can be used by executives and other strategic planners. The break even point is the point in time at which the costs of a project equal the money saved, or revenue made as a result of the project being implemented. The analysis of this point, and the variables leading up to it can help planners decide if implementing the project is a risk worth taking.

Break Even Analysis

Every business venture, new product line and internal project has a line of associated costs that the organization will have to absorb. The break even analysis can give you an idea of how long it will take for you to gain back your initial investment and be on the road to profitability. The break even point can be described in periods of time, or units produced. Like the cost benefit analysis, it can be a powerful tool in determining whether or not to proceed with a project.

eJustifyIt specializes in helping sales based companies convey this type of information effectively to their clients. By demonstrating to new customers that your company can bring added value to their company, you are reassuring them that they can feel confident giving you their business. eJustifyIt is pleased to provide a free "What's in it for them?" audio CD, a free initial business case On-Demand, and a free sales performance analysis and recommendation report to new customers. Give us a call at (800) 359-4211 to schedule your company's free consultation.