Measuring Business Value
There are many ways to measure the business value you deliver as part of your project. Some of these ways are tangible (money, shareholder value, market share) and some are intangible (Brand recognition, goodwill, strategic alignment etc).
Ultimately the best value comes down to an improvement in some financial measure for your company, and these are measured in the following ways:
Cost-Benefit Ratio:
The cost-benefit ratio = the Total benefit of the project / Total cost of the project.
Choose the highest.
Return on Investment (ROI)
Return on Investment = the Project Return – Project Cost / Project Cost x 100.
Choose the highest.
Internal Rate of Return (IRR)
IRR is the return on your investment in a given time period.
Choose the highest.
Net Present Value (NPV)
Net Present Value = Today’s value of our expected return – Initial investment.
Choose the highest.
Payback Period (PBP):
The Payback period = The Cost of the project / Average Annual Return.
Shorter is better.
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