No matter what project management course you take, there is one subject that will always crop up, and this is, of course, money. After all, every business needs to budget accurately if they are going to be a success. In this blog post, we are going to take a look at benefit-cost analysis in further detail. This is a comparative assessment of all of the expenses that are needed to introduce the project, as well as perform it and support any changes that arise because of it, and all of the benefits you expect to gain from the project. Read on to discover everything you need to know.
Comparing the costs of a business project with the perceived benefit is a good way to decide whether a project is worth it. If there are numerous projects on the table, a benefit-cost analysis can be just the thing to determine what option to go for. Not only this, but benefit-cost analyses can help you to prepare estimates for the resources that are going to be needed for the project, develop appropriate measures for project success – including both before and after the project, and finally, frame suitable project objectives.
When putting together a cost-benefit analysis, dealing with the expenditure is usually the easier part, as all of these can be numerically quantified. You need to make sure you consider all costs, including recurring expenses, such as repair, maintenance, materials, supplies, and personal, as well as non-recurring costs, including certain services and operations, parts, whether it is a 24 well plate or CRM software, investment, and labour. You also need to think about opportunity costs. This means the potential benefits if you were to spend your funds performing another project successfully. Also, factor in the potential expense if the project fails, as well as the cost of not doing the project at all.
What about the benefits? Well, there are some advantages that can be measured in terms of money, for example, boosted revenue or reduced operating expenditure. Numerical measures can also be applied to some other benefits, but not all. For example, let’s say you are undertaking a project with the end goal to boost the morale of staff. Some of the linked benefits here are fewer formal grievances, fewer absences, increased productivity, and reduced turnover. If possible, you should always try to express benefits in monetary terms, as this makes it easier to compare with the costs.
Hopefully, you now have a thorough understanding of what benefit-cost analysis is, and what it should include. Not only will this help you to determine whether to take on the project, but it will also give you the basis to plot objectives and decipher the resources needed. The results of your analysis will depend on two factors. The first is the assumptions on which your analysis is based. The second is how far into the future you look when identifying the benefits. Thus, it is important to keep this in mind when performing your cost-benefit analysis so that you can get the accurate results you need.