Cost Benefit Analysis is a relatively simple and widely used technique for deciding whether to make a change. As its name suggests, to use the technique, simply add up the value of the benefits of a course of action, and subtract the costs associated with it.

In ecommerce projects, costs are either one-off, or may be ongoing. Benefits are most often received by way of increased revenue and savings from operations cost. We build this effect of time into our analysis by calculating a payback period over 4 years. This is the time it takes for the benefits of a change to repay the one-off charges. Many companies look for payback over a specified period of time - e.g. three years.

In its simple form, cost benefit analysis is carried out using only financial costs and financial benefits. For example, a simple ecommerce cost benefit analysis of a cosmetics business would measure the one-off and ongoing cost of setting up the ecommerce site, and subtract this from the economic benefit of operational cost savings and increased revenue. It would not measure either the benefits of image, easy access to consumers, flexible payment options or the negative impacts of abuse of the site, risk of credit card transactions etc.

A more sophisticated approach to cost benefit analysis is to try to put a financial value on these intangible costs and benefits. This can be highly subjective and depends on the type of business. Therefore, we have not taken those parameters in to this model. You can modify this template if you wish to incorporate those parameters in to this analysis.

Download Bizfab Cost Benefit Analysis for Ecommerce (.xls)

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