How to Use Benefit Cost Analysis

 Benefit Cost Analysis

What happens when, instead of “putting your money where your mouth is,” you put your time where the money is? This is called a  Benefit Cost Analysis.

As a small business owner, this could be an intriguing question to explore. In fact, that’s what I recently did.

With a never-ending stream of ideas and business opportunities before me, I culled through three projects that were already on the SoulSalt schedule of work. All three, without examination, seemed like viable places to be putting our time, talent and energy. However, one quick exercise netted me a much needed reality check pretty darn fast. I used the back-of-the-napkin formula for the benefit/cost ratio.

Here’s what I found out:

One project, which we’ll code name “S & A,” calculated out to garner $3.20 for every $1.00 invested. Not bad odds to take to Vegas, right? If you could get that much out of a slot machine every time you put in a dollar, wouldn’t you pull on the one armed bandit all day?

Another project code named “W4E” is something I’m currently committed to. With my part of the work three-quarters of the way complete, I was disheartened to see that for every dollar of time, energy and effort I’ve spent, I’ll secure $0.50 in return over the next year. Wish I would have run the numbers BEFORE I started working on W4E.

Nevertheless, our “TNT” project brought back some hope. Calculations indicate that for every dollar invested in TNT, I’m apt to receive $8.33! Now that’s good news.

The entire exercise took less than 15 minutes and taught me many things. Not the least of which, I need to seriously consider shelving the first two projects and get moving on TNT! With a fixed amount of resources, I could have been (you could be too) spinning my wheels instead of making hay.

We all have limited amounts of time, energy and focus to give to our work. If you’d like to gain some clarity and analyze your projects, take a look at this tutorial “Benefit Cost Analysis”: