Cost Benefit or Benefit Cost Analysis

Today we will discuss cost-benefit analysis in project management. This technique is also known as benefit-cost analysis, cost-benefit ratio, project cost analysis, etc.

It is rare for an organization to have unlimited resources, so they routinely must choose the best option from all the opportunities available. One of the ways organizations make these decisions is by using cost-benefit analysis.

This technique is also very helpful when deciding on a new course of action.

Cost-benefit analysis has a vast scope and explaining it in one blog post is not easy, so I will provide a preliminary outline of this project cost analysis technique.

成本效益分析

成本效益分析是通常由高层管理人员执行的收益测量方法。

该技术在可行性研究中很有用，可以确定项目是否值得进行。

另外，在project selection analysis，成本效益分析有助于管理从多个选项中选择正确的项目。他们收集数据并分析所有项目，然后尝试发现哪个项目更有利可图。

成本效益分析提供了有价值的信息，例如：

  • 预期利润
  • 时间value of the profit
  • 比较项目的基础

预期利润

成本效益分析发现并将收益转化为货币价值。然后，从收益中减去投资成本以获得结果。

You can proceed if the result is positive; if not, abandon the idea.

例如，假设您的公司参与手动装订，您建议管理购买设备以提高效率。

Before submitting the proposal, you will perform the cost-benefit analysis. You will list the costs of the investment.

For example:

  • Machine cost
  • Maintenance cost
  • 这些机器使用的电费

Then you will identify the benefits, such as

  • 从改善生产中获利
  • 减少员工的成本
  • 优质产品的成本

You will figure out the investment cost and the monetary value of benefits.

You will then perform the cost-benefit analysis by subtracting the cost of investment from the benefits. Use this figure with management to justify your proposal.

利润的时间价值

In cost-benefit analysis, you calculate the expenditure and the expected profit. Remember that profit earned after several years will not have the same value as today, so consider inflation while analyzing the cost. Inflation erodes the value of money, so your profits won’t go as far

例如，每年假设通货膨胀率达到5％。一年后，今天可以购买100美元的价格将花费105美元。

Calculating the Current Worth

Assume that you invest 100,000 USD in a project. You expect to earn a 10,000 USD profit after one year.

Considering yearly inflation of 5%, what will the current value be?

The formula to find the Current Value is

fv = cv（1+r/100）^n

这里，

fv =未来价值

CV =电流值

R =通货膨胀

n = time

给定的值，

FV = 10,000 USD

r = 5

n = 1

将这些值放在公式中，

10,000 = CV（1+0.05）^1

CV = 10,000/1.05

CV = 9,523.80

因此，您的利润当前价值为9,523.80美元。

没有特定的成本效益分析公式；但是，简单的方程式可以为您提供准确的信息。

比较项目的基础

Cost-benefit analysis helps you select the best project when faced with many options. Here you compare the profit earned from each project in current values, and then choose the one with the highest profit.

If it is a multi-year project, you will not realize a profit in today’s value. You may hope you will profit from it; however, a Net Present Value (NPV) analysis could be eye-opening and worth doing.

The Advantages of Cost-Benefit Analysis

Cost-benefit analysis has many advantages. It helps organizations conduct feasibility studies and select prudently from many choices. It is also useful when an organization takes a new course of action. This analysis has several basic advantages:

  1. 它证明选择一个项目是合理的。
  2. 它有助于比较the cost invested and benefits.
  3. 它提供了一个用于比较可用选项的基线。
  4. It compares the future earnings with today’s dollar value.
  5. It helps select the most profitable project.

成本效益分析的局限性

福利成本分析有一些局限性。

It is useful for small项目持续时间较短。随着持续时间的增加，该技术变得更加复杂和笨拙。更大的项目更加困难；转换无形的成本并不容易，因此此技术不再有用。

随着项目的增长，无形的成本和收益越来越复杂。将这些成本和收益转换为货币形式并非易事。通货膨胀在更长的项目中起着重要作用。同样，项目持续时间越大，风险就越大。

Summary

The cost-benefit technique is a systematic approach to calculate the investment cost and received benefits. It is a simple technique that lets you know if you should proceed with the project or which project you should select among many.

从PMP考试的角度来看，成本效益分析是一个重要的概念。确保您完全了解它。

How do you use cost-benefit analysis in your organization? Please share your thoughts in the comments section.