How to do a cost benefit analysis 🔍 Evolving Strategies

EVOLVING STRATEGIES

This week’s opportunity to evolve your strategy

Digital sales strategy of using a cost benefit analysis for your strategy

Before you start implementing every strategy that comes to mind, because it sounds amazing. You should review to make sure the investment required will bring in the sales you’re looking for. Most importantly it’s to make sure you’re not losing money by putting in more than what you’re getting back.

In some cases, strategies can actually cause your business a loss; which is why a cost benefit analysis will help you decide what strategies to move forward with and which ones to stop working on.

Story time… You’ve thought of a great new business idea that’s going to drive in more sales than ever before. You are expecting it to double your sales revenue for the year and let you buy that dream car you’ve always wanted.

After 2 long years of planning and strategizing you finally implement your new strategy which you know for a sure fact will make you money. After 6 months, you’re not making anymore sales than you expected. In fact you spent $150K to implement 2 new products, system upgrades and technology. All to realize there were a few key insights you missed because you didn’t do a cost benefit analysis before deciding to move ahead, causing you a loss.

How to apply this:

What you should takeaway and apply to your digital sales strategy:

1. Break down total costs required

2. Break down total sales gained, monetary and non-monetary

3. Use resources and worksheets

Break down total costs required

Total costs is a list of everything you need to put into the strategy in order to successfully execute on it. There are many components to consider outside of the monetary investment required.

If you’re employees are working on this strategy, that’s time taken away from working on something else that could be adding value to your business. In some cases you won’t have full valuation but do calculate a best estimate.

Make a list and add up the total cost required.

• Advertising to launch and bring awareness to aspects of your strategy (i.e. new product)

• Software leasing or program purchases. If this requires new software are you leading or having it built specifically for your business

• Staff time, consider the time being spent working on this when it could be spent doing other value add opportunities

• Project delays, if there are any issues with launching on time then it’s costing your business money in some way

Break down total sales gained, monetary and non-monetary

Total benefits gained refers to intangible value your business receives from the execution of the strategy. This could cause your business to go viral and draw millions of eyeballs to your products. This brings many benefits outside of sales such as brand awareness and brand recognition, positive word of mouth marketing and more.

Make a list along with valuations on what the total benefits add up to.

• Total sales and total revenue from execution the strategy. This is a dollar figures your business will gain

• Brand awareness and brand recognition among new and existing audiences. New audiences will hear about your business and existing ones may favour your business more than the competitor

• Customer retention, existing customers will stay and reduce the cost of you losing them and increase the sales

Use resources and worksheets

There are many resources available and quite a few which are free to use, that will let you run a simple cost benefit comparison to decide if a strategy will make you revenue before you investment too much time and money.

A simple adding up all your costs and adding up all your benefits, subtract costs from benefits and see if you are positive or negative $$$. Review if in the positive to see if it meets the minimum threshold of the value you’re getting. If in the negative you know it’s time to stop working on this strategy and look at other opportunities.

Here’s a free worksheet I’ve built you can use. Appreciate if you could please leave a review and share any feedback on improvements I can make.

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