Return on Investment 2
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Transcript of Return on Investment 2
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Return on Investment: Initial
Considerations for Measuring Cost-Savings of AT Reuse
Sara Sack
Director of Assistive Technology for
KansansMay 25, 2007
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What is ROI Analysis?
One of several approaches to building afinancial business case (Solution Matrix)
A performance measure used to evaluate theefficiency of an investment or
A performance measure to compare theefficiency of different investments.
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What is ROI Analysis? (cont.)
ROI is a traditional financial measure to
determine benefit to the business
Benefit of trainingBenefit of asset purchase decisions (computer
systems or a fleet of vehicles)
Marketing, recruiting programs
Example: Floridas DOE is evaluatingmeasures of performance in light of resourcesallocated to individual schools and districts
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What is ROI Analysis? (cont.)
ROI is a metric that yields some
insights into how to improve
business results in the future (L.
Dombrowski)
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Simple ROI vs. ROI
The benefit (return) of an investment isdivided by the cost of the investments; theresult is expressed as a percentage or a ratio.This is referred to as simple ROI.
ROI= Gains from investmentCost of investment
Cost of Investment
$700,000 - $500,000 = 40%
$500,000
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Simple ROI Investment Example
ROI is used to compare returns on
investment where the money gained or
lostor the money investedare not easilycompared 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.
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Simple ROI Investment Example
$50/$1,000
$1050 - $1000 = 50 = 5% ROI
$1000 $1000
$20/$100
$120-100 = 20 = 20% ROI
$100 $100
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ROI (or Complex ROI)
In complex business settings, it is not
always easy to match specific returns with
specific costs (Solution Matrix) New formulas involve calculating:
Total BenefitTotal Costs = ---- x 100 =ROI
Total Costs
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Considerations for Using ROI
Locate software programs designed to helpmanagers identify total benefits and total costs
Establish measures and state them publicly before
calculating ROI
Determine time periods and state them carefully.
Determine appropriate calculations to be made.
Be aware that shorter or longer time periods may
produce quite different ROIs.
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Next Steps for ATK Related to ROI
Review electronic management software including RADDIE, SolutionMatrix, and others
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
State ROI measures before starting
Compare trial software programs
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Questions?
For more information contact: Sara
Sack, University of Kansas, 620-421-8367 or [email protected]