April 17, 2023

Business Benefits Are About Reaching Objectives

counterpart of benefits in a business analysis

Business Benefits Are About Reaching Objectives

The key to valuing benefits is understanding how these results contribute to reaching objectives. That premise drives the search for and assignment of value to a variety of outcomes that fall under the broad category of business benefits, and is the starting point in the analysis of actions, projects, programs, products, and the lifecycle of assets.

In strategic planning, cost/benefit studies, and business case analysis, business analysts primarily estimate future costs and benefits by anticipating likely action outcomes. They use a variety of cash flow metrics to make cost/benefit comparisons, such as return on investment (ROI), internal rate of return (IRR), net present value (NPV) and payback period.

They also rely on practical definitions for cost and benefit that provide a basis for identifying, measuring, valuing, and comparing all classes of business benefits and costs. Many people new to these tasks quickly learn that some kinds of benefits are easier to measure and value than others, including financial ones--cost savings, investment returns, incoming revenues, or avoided costs.

Nevertheless, the analysis of these and other nonfinancial objectives is important. For example, the firm might install a new security system that will help protect warehouse employees and loading dock workers, managers, and other critical personnel from theft or loss of assets.

This is a valuable contribution to business objectives, and should receive credit in the analysis of this action outcome. But it is not a clear-cut business benefit, and it is not obvious how to assign the full value of this result to the action in view.


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