How To Perform a Cost Benefit Analysis!

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Whether you realize it or not, you perform cost-benefit analyses every day. From deciding if your morning coffee is worth the five dollars or if going to that concert is worth the two-hour commute. 

Ultimately, a cost-benefit analysis, sometimes abbreviated as CBA, is a tool to help determine if a particular decision’s benefits outweigh its expected costs.

However, completing a full cost-benefit analysis can sometimes be a little more involved, especially when making significant financial or business decisions. 

So, keep reading for a few tried and true methods to help you build an accurate cost-benefit analysis for your business or personal life.

Use a template

One of the easiest ways to perform a cost-benefit analysis is to use a helpful cost-benefit analysis template. Fortunately, many of these templates exist online and are extremely easy to use.

Templates allow you to visualize all the costs and benefits associated with a decision and will help you calculate the expected result of a decision. Many templates will also allow you to organize your information into categories, such as equipment costs, fixed costs, etc.

When making a cost-benefit analysis for a big decision, organization is critical, and pre-made templates are practical methods of organization.

Create a spreadsheet

Spreadsheets are a crucial tool for productivity and they’re also invaluable when completing a cost-benefit analysis. Creating a spread is a similar method to creating an online template, but you have more control over how the spreadsheet looks.

When creating a spreadsheet, many recommend assigning values to each cost and benefit of the decision you’re trying to make. Then, calculate the totals and compare them to make your decision.

Remember, your values do not have to be monetary, although it’s easier for some people to analyze their decision if it’s money-related. You may prefer to use values like time spent or the number of materials used if those criteria make more sense to you.

Make a list

If you don’t think your decision requires a complete template or spreadsheet, you can still make a list on your own. However, more significant decisions will likely benefit from more organization. On the other hand, a simple list works well if you need to visualize the factors in your analysis.

To make a list, split your page in half. Write the costs of the decision on one side and the benefits on the other. You may also want different sections for large, medium, and small expenses and benefits. 

All you need to do now is look at your list, analyze all the costs and benefits, and decide if you believe the costs outweigh the benefits. This method takes far less time than the other two, so it is most practical if you need a simple, quick decision. 

Wrap up

Performing a cost-benefit analysis can be as simple or detailed as you want it. Whether you elect to use a pre-made template, create a spreadsheet, or make a quick list, an organized analysis can help you make better, more confident decisions.

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