Presentation on theme: "Return on Investment: Initial Considerations for Measuring Cost- Savings of AT Reuse Sara Sack Director of Assistive Technology for Kansans May 25, 2007."— Presentation transcript:
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? n One of several approaches to building a financial business case (Solution Matrix) n A performance measure used to evaluate the efficiency of an investment or… n A performance measure to compare the efficiency of different investments.
What is ROI Analysis? (cont.) n 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: Floridas DOE is evaluating measures of performance in light of resources allocated to individual schools and districts Example: Floridas DOE is evaluating measures of performance in light of resources allocated to individual schools and districts
What is ROI Analysis? (cont.) n ROI is a metric that yields some insights into how to improve business results in the future (L. Dombrowski)
Simple ROI vs. ROI n 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 Cost of Investment $700,000 - $500,000 = 40% $700,000 - $500,000 = 40% $500,000 $500,000
Simple ROI Investment Example n ROI is used to compare returns on investment where the money gained or lostor the money investedare 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 $1050 - $1000 = 50 = 5% ROI $1000 $1000 $1000 $1000$20/$100 $120-100 = 20 = 20% ROI $120-100 = 20 = 20% ROI $100 $100 $100 $100
ROI (or Complex ROI) n In complex business settings, it is not always easy to match specific returns with specific costs (Solution Matrix) n New formulas involve calculating: Total Benefit – Total Costs = ---- x 100 =ROI Total Benefit – Total Costs = ---- x 100 =ROI Total Costs Total Costs
Considerations for Using ROI n Locate software programs designed to help managers identify total benefits and total costs n Establish measures and state them publicly before calculating ROI n Determine time periods and state them carefully. n Determine appropriate calculations to be made. n Be aware that shorter or longer time periods may produce quite different ROIs.
Next Steps for ATK Related to ROI n Review electronic management software including RADDIE, Solution Matrix, and others n 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 n State ROI measures before starting n Compare trial software programs
Questions ? Questions ? For more information contact: Sara Sack, University of Kansas, 620- 421-8367 or firstname.lastname@example.org