The opportunity costs and other key factors realized out of a successful project, are a result of rigorous examinations conducted to test the feasibility of a project in terms of finances. This analysis has granted individuals & firms an opportunity to compare the projected or estimated costs and benefits associated with a project, hence offers them a chance to determine whether the decisions arrived at, makes sense from a business perspective.
It’s an analysis which is conducted throughout the project’s life cycle (Before, During, & After). Project Managers, Executives, Program Managers, Governments, Individuals etc., should never proceed to pursue a project whose projected costs outweigh the benefits. Therefore, it calls for immediate consideration to help in aligning different associated factors to match the desired outcomes.
This tool is critical and essential for anyone desiring to leverage on it as part of his/her decision-making process. Being a data driven tool, it has made the decision-making process logical and free of any biasness. It has simplified the process and become an eye opener to unveil hidden costs and benefits that could’ve been easily ignored.
Inasmuch as the process of defining the variables is involving and engaging in nature, the tool offers assurance of relevant, honest, and accountable decisions out of every analysis due to its robustness. It is a tool that is right at our disposal, thus calling for users to immediately put its usefulness into action.
For instance, it unveils to the users how an increased self-esteem after a successful learning and success realization is far much more significant since it’s a hidden benefit.
Steps of a Good Cost-Benefit Analysis
i)Defining & Establishing a Framework for Analysis
It entirely depends on your organization specifics. The organization must begin by identifying the goals & objectives as well as what you anticipate as success upon completion of the project. This creates room for identification & proper understanding of the costs & benefits associated with the project.
Point to note: The only way to arrive at your desired output is through a set of different metrics which must be accurately defined.
ii)Identifying Your Costs & Benefits
Here, you need to sit down and compile a list of both the benefits and costs of your proposed project. Critically, tally your costs starting with your Direct & Indirect Costs & Benefits. Solicit more on different additional costs & Benefits that may affect your Analysis and factor them in where necessary & applicable.
iii)Assigning of a Value to Each Cost & Benefit
The value attached to all your Costs & Benefits will help you make your comparison accurately. Although Direct Costs & Benefits will be easier to assign a value, it isn’t the same case with Indirect Costs & Benefits; but there exist many software tools & methods to help you quantify the challenge of valuing them.
iv)Tallying of the Total Value of Benefits & Costs & Comparing
At this point, all that is required from you is to decide based on your findings. If your Benefits outnumbers your Total Costs, it true, there is a need for you to proceed with the Project. On the other hand, if the findings are on the contrary, please do reconsider the Project. Source for more options that perhaps you haven’t considered.
Conclusion
The interlink in M&E :
Project Management and Evaluation with Data Management and Analysis
