This week the Wily Manager guys are talking about how to do a Cost-Benefit Analysis. This simple, yet effective tool can provide a sober second thought for decisions you make as a manager.
Monday’s Tip: Look at time, energy and input savings. People forget that time costs money, so make sure you calculate the labor savings of your idea, and calculate the value of that time saved. (hours saved X $/hour)
Tuesday’s Tip: Don’t forget capital costs. Money costs money. If your idea is going to tie up capital (or release capital) then calculate the value of that.
Wednesday’s Tip: Make a recommendation. It’s not good enough to simply do a cost benefit analysis. Use your work to recommend a course of action and put together a short action plan to outline how it will happen.
Thursday’s Tip: Don’t forget about intangibles. You may be harder to put a dollar figure on such things as safety, environment, reputation or morale, but you should at least note the impact on these things in your cost benefit analysis.
Friday’s Tip: Ask for help if it gets complicated. We advocate a simple cost benefit analysis, but if it becomes complicated, you may need to reach out to a Finanace (or other) professional to assist.