Return on Investment - PowerPoint

Document Sample
Return on Investment - PowerPoint Powered By Docstoc
					  Return on Investment: Initial
Considerations for Measuring Cost-
      Savings of AT Reuse

                 Sara Sack
    Director of Assistive Technology for
                  Kansans
                May 25, 2007
       What is ROI Analysis?

 One of several approaches to building a
  financial business case (Solution Matrix)
 A performance measure used to evaluate the
  efficiency of an investment or…
 A performance measure to compare the
  efficiency of different investments.
    What is ROI Analysis? (cont.)

   ROI is a traditional financial measure to
    determine benefit to the business
    – Benefit of training
    – Benefit of asset purchase decisions (computer
      systems or a fleet of vehicles)
    – Marketing, recruiting programs
      Example: Florida’s DOE is evaluating
      measures of performance in light of resources
      allocated to individual schools and districts
 What is ROI Analysis? (cont.)

 ROI is a metric that yields some
 insights into how to improve
 business results in the future (L.
 Dombrowski)
           Simple ROI vs. ROI

   The benefit (return) of an investment is
    divided by the cost of the investments; the
    result is expressed as a percentage or a ratio.
    This is referred to as ―simple ROI‖.

       ROI= Gains from investment – Cost of investment
                       Cost of Investment

                $700,000 - $500,000 = 40%
                      $500,000
    Simple ROI Investment Example

   ROI is used to compare returns on
    investment where the money gained or
    lost—or the money invested—are not easily
    compared using monetary values. For
    example, a $1,000 investment that earns
    $50 in interest obviously generates more
    cash than a $100 investment that earns $20
    interest, but the $100 investment earns a
    higher return. So….
Simple ROI Investment Example

$50/$1,000
  $1050 - $1000 = 50 = 5% ROI
       $1000      $1000
$20/$100
   $120-100 = 20 = 20% ROI
     $100      $100
          ROI (or Complex ROI)

 In complex business settings, it is not
  always easy to match specific returns with
  specific costs (Solution Matrix)
 New formulas involve calculating:
    Total Benefit – Total Costs = ---- x 100 =ROI
           Total Costs
     Considerations for Using ROI
   Locate software programs designed to help
    managers identify total benefits and total costs
   Establish measures and state them publicly before
    calculating ROI
   Determine time periods and state them carefully.
    Determine appropriate calculations to be made.
   Be aware that shorter or longer time periods may
    produce quite different ROIs.
Next Steps for ATK Related to ROI

   Review electronic management software including RADDIE, Solution
    Matrix, and others
   Determine Internal and External benefits and costs
     –   Staff/labor costs
     –   Storage
     –   Transportation/delivery costs
     –   Repair costs
     –   Supplies
     –   Marketing and outreach
     –   Training
     –   Volunteer time and associated costs
     –   Overhead
   State ROI measures before starting
   Compare trial software programs
Questions?

For more information contact: Sara
Sack, University of Kansas, 620-
421-8367 or ssack@ku.edu

				
DOCUMENT INFO
Description: Return on Investment document sample