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Step 4: Crunch the Numbers (Part 2 of 2)

June 1, 2018

 

1. Calculate Return on Investment (ROI)

As we have been restating, you must constantly be checking with your organization to use the language, calculations and presentation formats that are expected.  The same rule applies here.  There are many ways of calculating "ROI" and people are pretty wreckless with how they throw this term around.

 

Step one is to determine how ROI is preferred to be calculated by the audience you are presenting your proposal to.  How do they want to see it?  There may be more than one preferred method depending on different decision-makers.  This Investopedia explainer video reviews a simple payback example. 

 

 

The most common calculations used in business cases include the following.  These may be familiar to you which means you can do the calculations yourself.  Or they may be new which means you should learn the basics, give it a shot and get a colleague to check your work.

 

Each is used in different circumstances and is preferred by different people (see chart below). Find out what is preferred by the person/people you will be pitching to.
 

 

More advanced and nuanced calculations

There are many ways to calculate the potential performance of an investment.  Besides the above, there is return on assets, return on inventory and an almost innumerable other set of variations. Find out what ROI information successful proposals in the past have used.  And find out what unsuccessful proposals have done.  Copy and even improve on the former, and run from the latter.  

 

2. Account for Risks...and Good F