A template for cost-benefit analysis - How to do it!
In everyday business life, decisions have to be made every day. How successful a company is in doing so depends on one very fundamental thing: the basis on which these very decisions are made. It is very promising to rely on a cost-benefit analysis. Using a template, this is not only quickly created, but it is also perfectly suited to significantly improve the profitability of an entire company.
Find out why this is so, how to find the perfect template for your cost-benefit analysis and how to easily create it yourself in this article.
Table of contents
What is a cost-benefit analysis?
A cost-benefit analysis (CBA) is a calculation of economic efficiency. It compares the relationship between costs and benefits in order to create an evaluation basis for entrepreneurial decisions. Thus, a CBA serves to examine the advantages and disadvantages of investments and to assess financial risks, to evaluate measures and to analyze the sustainability of decisions. In order to obtain an optimal overview, it is advisable to make the cost-benefit analysis with a template.
The advantage here is that you have all the factors that affect an investment bundled in just one file and thus do not lose the overview. Especially in large projects, there is a multitude of objective, but also subjective values that affect the cost-benefit analysis in very different ways. A template helps you to keep an eye on all these aspects automatically and easily.
Where does a cost-benefit analysis with template come in?
The larger a project is, the larger its investment sum usually is. While the pure costs of an investment are usually easy to determine, the concrete benefits are generally much more difficult to identify. The reason for this is that neither the success of a measure nor its impact can be quantified in advance. In addition, the benefit of an investment is often subject to a subjective evaluation by the decision-maker. A cost-benefit analysis helps to clearly document all possible factors that have an impact on a business decision and to evaluate them objectively and neutrally across departments.
Here, too, it is an advantage to rely on a template. After all, anyone who creates their cost-benefit analysis using a template enables everyone involved to work on the same basis. In this way, no data is lost, important aspects are not overlooked, and additional factors that other departments consider relevant can be easily added.
The preparation of a cost-benefit analysis with a template is particularly suitable if, for example, you want to
- want to modernize your IT department
- Planning conversion measures for your business
- Top up training and development measures for your employees
- want to implement new manufacturing processes
- introduce new business management tools
- would like to increase the vehicle fleet
Basically, a CBA fits as a pattern whenever larger financial investments are planned.
A cost-benefit analysis (CBA) gives you these advantages
In general, it is important to distinguish between two types of benefits: monetary and non-monetary. This is because the benefits of an investment can have both tangible and intangible advantages. For example, in addition to increased sales and greater profits, growing employee satisfaction, improved service quality or a reduction in overtime are among the pluses that can be achieved with an investment. And that's exactly what you can document with a cost-benefit analysis based on a template.
This means that those who rely on the evaluation of entrepreneurial decisions with a cost-benefit analysis as a basis have all the factors that influence this very decision available at a glance. In this way, even the smallest adjusting screws can be used optimally, unnecessary factors can be identified and eliminated, and the appropriate investments can be played out optimally.
But why should one work with a template or a sample when preparing a cost-benefit analysis? What does it help to always have an example for a cost-benefit analysis? And what role does Excel play in this?
This is what a cost-benefit analysis and its submission should include
Which aspects are ultimately included in a cost-benefit analysis, or in the template that serves as an example for all further, subsequent CBAs, always depends on the industry in which it is used. This is because different parameters apply depending on the company, and these affect the costs and benefits of each measure. There is therefore no blueprint that can be applied to all cases. Rather, there are very individual factors that differ from project to project.
However, what is true for any cost-benefit analysis are five basic points that should be clarified before creating and completing the template:
- the development of objectives - what should the cost-benefit analysis achieve?
- the implementation - who can perform the CBA neutrally and objectively?
- the decision-making power - who ultimately determines which measures are used?
- the factor definition - which factors are relevant for the cost-benefit analysis?
- the timeline - over what duration should the cost-benefit analysis run?
Once these five points are clarified, you can create the template for your CBA.
Cost-benefit analysis in personnel qualification - an example
The following example shows how a cost-benefit analysis in the personnel area can look and which factors a template should contain in this case:
The retailer "Gemütlich Wohnen" employs a total of ten service staff for its stationary trade and for its online store, which it recently went live. In order to improve customer service and satisfaction, the owners want to send their ten employees to a two-day training session. In simple terms, this means that both stores will be closed for two days, no work will be done for two days, and the employees will incur additional costs for two days.
This is set against the profit that this measure could bring. The business owners know the exact costs of the training, i.e. course fee, accommodation, travel and loss of earnings. And they have also defined a figure for the expected benefit in the form of improved work processes. In order to be able to evaluate whether this investment is worthwhile, the business owners prepare the following cost-benefit analysis:
|Effort factor||Costs||Benefit factor||Expected benefit|
|Course fee||2.500 €||Improved workflows||3.300 €|
|Travel expenses||1.500 €||increased sales||16.000 €|
|Overnight stay||1.650 €|
|Loss of earnings||2.200 €|
|Total cost||Total benefits|
|7.850 €||19.300 €|
Through the cost-benefit analysis, the business owners can compare the total costs of 7,850 euros with the expected total benefits of over 19,000 euros. In this way, they can see that the planned investment would be worthwhile.
Here you will find a suitable template for your cost-benefit analysis
The advantages of a cost-benefit analysis has convinced you? Then you will find the corresponding template for download below.
Image source Cover image: © Andrey Popov/Adobe Stock