simple return on investment calculations n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Simple Return on Investment Calculations PowerPoint Presentation
Download Presentation
Simple Return on Investment Calculations

Loading in 2 Seconds...

  share
play fullscreen
1 / 19
hoai

Simple Return on Investment Calculations - PowerPoint PPT Presentation

85 Views
Download Presentation
Simple Return on Investment Calculations
An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. Simple Return on Investment Calculations Elton Billings elton@cluebox.com

  2. Focus of This Discussion: • Tactical ROI • ROI for a single initiative or application • Identification of sources of Return • Examination of task cost savings on a per-transaction basis

  3. Some ROI Comparison Methods: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • Return after deducting Investment for a fixed period: • (Return - Investment) • How long until Return equals Investment: • (Investment / Return per week)

  4. Identifying Costs (Investment) • One time costs • Development costs • Cost of any new software • Cost of any new hardware • Training costs • Ongoing costs • Information update costs • Maintenance costs • Training costs • Costs to increase capacity when needed

  5. Identifying Sources of Return • Savings through shorter task time • Savings through shorter processing time • Savings through the prevention of “leakage”

  6. A Method for Identifying Savings: • Observe old process • Observe new process • Make sure to include all phases of both methods • Measure process times for both • Check for any statistical differences in outcome • Measure frequency of task • Understand fully loaded employee cost per hour

  7. Old Conference Room Application:

  8. Web Conference Room Application:

  9. Costs and Savings • Costs: • 3 days to develop interface • 24 hrs x $40 = $960 • Savings: • Each reservation took 10 minutes less • 4560 non-recurring reservations first year • 760 hrs x $40 = $30,400

  10. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($30,400 / $960) x 100 = 3167% • Return after deducting Investment for a fixed period: • Return - Investment • $30,400 - $960 = $29,440 • How long until Return equals Investment: • Investment / Return per week • $960 / $585 = 1.6 weeks

  11. Business Card Request:

  12. Identifying Sources of Return • Online form and paper form took about the same time to complete • ?????????? • The rest of the story… • Paper form left in manager’s inbox for approval • When we tried to follow up, it was gone • Filled out form again • Purchasing department completed and sent printing request to vendor

  13. Costs and Savings • Costs: • 5 days to develop application and web interface • 40 hrs x $40 = $1600 • Savings: • Each order took 10 minutes less time for routing and processing • One third of orders involved about 6 minutes for searching, questions, and re-submission of forms • 743 Orders first year of application • 148 hrs x $40 = $5920

  14. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($5920 / $1600) x 100 = 370% • Return after deducting Investment for a fixed period: • Return - Investment • $5920 - $1600 = $4320 • How long until Return equals Investment: • Investment / Return per week • $1600 / $114 = 14 weeks

  15. New Business Card Request:

  16. Vacation Request:

  17. Identifying Sources of Return • Old process was to send e-mail to department admin, who forwarded to payroll after approval • Online approval process cut delays due to missing information, loss of e-mail • The rest of the story… • Discovered verbal approvals sometimes skipped process • E-mails not always forwarded • No reliable record of requests existed • “Leakage” may have been as great as one day per person per year

  18. Costs and Savings • Costs: • 5 days to develop application and web interface • 40 hrs x $40 = $1600 • Savings: • Each request took 10 minutes less time for routing and processing • 3218 requests in first year • 536 hrs x $40 = $21,440 • Estimated 5% of employees correctly reported one additional day of vacation each • 5% x 800 employees = 40 days • 320 hrs x $40 = $12,800 • Total savings = $34,240

  19. ROI Calculations: • Return as a percentage of Investment over a fixed period: • (Return / Investment) x 100 • ($34,240 / $1600) x 100 = 2140% • Return after deducting Investment for a fixed period: • Return - Investment • $34,240 - $1600 = $32,640 • How long until Return equals Investment: • Investment / Return per week • $1600 / $658 = 2.4 weeks