2Contents Why benefits analysis is needed? Identifying the benefits How are benefits identified?Examples of tangible benefitsExamples of intangible benefitsThe basis of Bayesian analysisThe Bayesian methodExample of Bayesian analysisThe Bayesian estimateThe next steps
3Why benefits analysis is needed… Benefits analysis identifies what positive value is expected to be obtained from a project.Helps in the assessment of whether the project is worth doing.Provides a basis for future assessment of whether the benefits were realised.Notes:
4Identifying the benefits There are two types of benefits:Tangible benefits: where the dollar value of the benefit can be easily assigned because values are readily measurable.Intangible benefits: where the dollar value of the benefit is not able to be assigned.Notes:
5How are benefits identified… The sponsor of the project is the best person to identify the benefits. The sponsor owns the benefits.Consult with a number of different areas that are going to be impacted by the solution to identify additional benefitsBrainstorming is a useful technique for identifying possible benefits.(refer to Guide to brainstorming for instructions on this technique).Notes:
6Examples of tangible benefits Reduce clerical labour costsReduce clerical equipment expenseReduce space & overhead costsReduce inventory carrying expenseReduce accounts receivable & bad debtsIncrease sales by 10%Notes:
7Examples of intangible benefits Improve customer serviceMake better business decisionsIncrease market shareBetter manage financial resourcesImprove company imageNotes:
9The basis of Bayesian analysis Assumes that out of several identified possible events, one will certainly occur.Uses expert opinion to identify what events are likely to occur and the probability of each.The sum of these probabilities must equal 1.Hence a value can be assigned based on the value of each possible event and the likelihood of it occurring.
10The Bayesian method For each benefit: Identify the most appropriate expert(s)Identify each value outcome that can result from the intangible benefitFor each value outcome, the expert(s) identify each of the possible scenarios (events) that are likely to occur as a result of the intangible benefitThe expert(s) quantify for each event the probability (a number between zero and 1) that it will happenThe probabilities are refined until the sum of these is equal to one.A dollar value is assigned to each event.Multiply the probability of each event by the dollar value of the event and sum the result to produce the Bayesian benefit value.Repeat the process for each year the benefit is being evaluated for.
13The next stepsThe values assigned to the benefits are recorded in the business case and entered into the benefits section of the financial calculator for financial analysis.For further assistance refer to the guide for financial analysis.