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Cost benefit analysis and its application in project management 

Every project should be assessed on its ability to return a net positive effect to the organisation. Cost-benefit analysis provide a framework to assess this.

Questions to consider from the vantage of benefit –

  • How much money could this project save our organization? 
  • How much money will it bring in from existing customers?
  • How much time will it save? 
  • How will it improve the customer experience?

Questions to consider from the vantage of cost –

  • How much time will people have to spend on this project?
  • What are the one-time costs?
  • Are there any ongoing costs?
  • What about long-term costs? 

Additional intangible benefits

  • Customer satisfaction. Will the project increase customer retention, causing them to spend more on the company’s products or services? 
  • Employee satisfaction. Is the project likely to improve employee morale, reducing turnover? 
  • Employee productivity. Will the project reduce employee’s overtime hours, saving the company money?
  • Brand perception. Is the project likely to improve the company’s brand perception and recognition, attracting more customers or providing a competitive advantage?

Formula to the application of cost benefit analysis –

( Gains – Costs) / Costs = ROI

Further reading –

https://www.projectmanager.com/blog/cost-benefit-analysis-for-projects-a-step-by-step-guide

https://pmstudycircle.com/cost-benefit-or-benefit-cost-analysis/

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