How do you evaluate tangible benefits?


Quick Answer

A business analyst can evaluate tangible benefits using key performance indicators and benchmarks such as a cost-benefit analysis or an opportunity-cost analysis. An analyst can evaluate non-financial benefits by demonstrating how such benefits help an organization realize its financial objectives.

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Full Answer

Tangible benefits that have direct financial costs are typically evaluated using a cost-benefit analysis. A cost-benefit analysis involves the identification of a tangible benefit and the estimation of the costs of achieving the benefit.The costs of implementing a particular strategy should not exceed 50 percent of the expected financial benefits.

Opportunity-cost analysis typically includes more factors than the cost-benefit analysis. For example, the opportunity-cost analysis of creating a business website includes an analysis of whether the business should outsource the project or use its own staff. Using its own staff may reduce the cost of the project, but may make the business lose customers if the staff lack the expertise to build a website that looks professional.

A non-financial tangible benefit such as achieving a reduced customer churn rate relates directly to a company's objectives of growing its market share and increasing profits. Management typically considers tangible benefits that help the company achieve objectives it has invested resources in as important, which should guide the evaluation.

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