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Return on Investment: Initial Considerations for Measuring Cost-Savings of AT Reuse

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?. One of several approaches to building a financial business case (Solution Matrix)

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Return on Investment: Initial Considerations for Measuring Cost-Savings of AT Reuse

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  1. Return on Investment: Initial Considerations for Measuring Cost-Savings of AT Reuse Sara Sack Director of Assistive Technology for Kansans May 25, 2007

  2. What is ROI Analysis? • One of several approaches to building a financial business case (Solution Matrix) • A performance measure used to evaluate the efficiency of an investment or… • A performance measure to compare the efficiency of different investments.

  3. What is ROI Analysis? (cont.) • 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: Florida’s DOE is evaluating measures of performance in light of resources allocated to individual schools and districts

  4. What is ROI Analysis? (cont.) • ROI is a metric that yields some insights into how to improve business results in the future (L. Dombrowski)

  5. Simple ROI vs. ROI • 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 $700,000 - $500,000 = 40% $500,000

  6. Simple ROI Investment Example • ROI is used to compare returns on investment where the money gained or lost—or the money invested—are 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….

  7. Simple ROI Investment Example $50/$1,000 $1050 - $1000 = 50 = 5% ROI $1000 $1000 $20/$100 $120-100 = 20 = 20% ROI $100 $100

  8. 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 Benefit – Total Costs = ---- x 100 =ROI Total Costs

  9. Considerations for Using ROI • Locate software programs designed to help managers 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.

  10. Next Steps for ATK Related to ROI • Review electronic management software including RADDIE, Solution Matrix, 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

  11. Questions? For more information contact: Sara Sack, University of Kansas, 620-421-8367 or ssack@ku.edu

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